Malaysian palm oil futures edged lower on Friday to 2,109, due to tracking weaknesses overseas in soy prices in China and the US.
Futures Crude Palm Oil (FCPO) benchmark November 2014 contract settled at 2,109 which was up 25 points or 1.2 per cent from 2,084 last Friday.
Trading volume increased to 222,193 contracts from contracts totaling 146,074 from last Monday, Wednesday and Thursday.
Open interest based decreased to 810,180 contracts from contracts 856,890 from last Monday, Wednesday and Thursday.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia palm oil products for the first 15 days of September increased 31.5 per cent to 750,425 compared with 570,761 during the first 15 days of August. Demand from the EU doubled, while China and India increased.
Another cargo surveyor, Societe Generale de Surveillance (SGS) report (September 15, 2014) showed that Malaysia’s palm oil export rose 33.8 per cent to 735,334 for the first 15 days of August compared with 549,784 during the first 15 days of July.
Solvent Extractors’ Association (SEA) reported India increased imports of palm oil by 22.4 per cent. Spot ringgit eased slightly on Friday to 3.2305 due to demand from oil exporters for settlements, according to Reuters.
On the whole, the ringgit continued to weaken this week, reaching a week low at 3.247, due to data showing China’s economy slowing coupled with news the Federal Reserve will likely raise interest rates by the end of next year, and investor’s reaction from an update the central bank kept interest rates untouched, which is add pressure on the ringgit.
The ringgit could continue to weaken next week to 3.25 to 3.30 region, according to Reuters.
On Monday, soybean prices continued to hover below US$10 per bushel as concerns eased over frost damage. On Tuesday, soybean prices fell 0.9 per cent to US$9.8-3/4 per bushel due to a report indicating that good harvest weather caused bearish sentiment as investors anticipate record supplies of rival oilseeds, Reuter said.
On Thursday, price climbed for a second consecutive session as bargain buying by end users and the threat of potential harsh weather supported the price.
On Friday, soybean fell to a four year low as favourable weather pressured the price downwards, while farmers continued harvesting. This week soybean dropped by 11 per cent, according to Reuters.
Following the daily FCPO chart, the price reached a one-month high, due to steady gains in US and China soy markets and a reported increase in exports during the first half of September, while overseas buyers took advantage of the removal of export duty for two months.
On Wednesday, the price continued to climb due to encouraging export data supporting the price. However, gains were restrained due to potential record supplies of rival oilseeds threaten global demand for crude palm oil.
On Thursday, the price reached a five week high due to a weakening ringgit increased buying interest. On Friday, the price fell as prices tracked lower overseas soy markets.
Technical analysis
According to the weekly FCPO chart, the trend continued to remain bullish as the price rose for the third consecutive week. However, potential bearish sentiment still remains due to investors wariness of record supplies in rivaling edible oilseeds.
According to the daily FCPO chart, on Monday, the price broke first resistance line 2,090, and bounced top bollienger band and second resistance line 2,120. On Wednesday, the price broke resistance line 2,120, and the top bollienger band continued to expand.
On Thursday, the price reached a five week high, then retreated back to remain flat, as the price bounced top bollienger band. On Friday, the price fell, initially ranging the middle bollienger band then breaking below, the prices closed below now support line 2,120.
By observing the daily FCPO chart, next week, the price has potential to bear as price bounced top bollienger band on Thursday and could test 2,050.
However, according to weekly FCPO chart, price has prospect of touching the middle bollienger band 2,300 in the coming weeks. Overall, price could range within 2,250 and 2,050.
As price closed below 2,120, the resistance lines that will be observed next week will be placed at 2,050 and 2,090, while support lines will be place at 2,090 and 2,050.
Fundamental Analysis
ITS and SGS reporting on September 22 (Monday).
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my. Disclaimer: This article is written for general information only. The writers, publishers and OPF will not be held liable for any damage or trading losses that result from the use of this article.