Malaysian palm oil futures edged lower on Friday to RM2,348 due to technical selling, aided with the strengthening ringgit. Futures crude palm oil (FCPO) benchmark March 2015 contract settled at RM2,348, up 64 points or 2.8 per cent from RM2,284 last Friday.
Trading volume increased to 134,251 contracts from 107,093 contracts from last Monday to Wednesday.
Open interest based decreased to 498,814 contracts from 506,323 contracts from last Monday to Wednesday.
Spot ringgit strengthened on Friday to 3.5610, due to expectations of a strong US jobs report pushed up regional stocks markets.
According to Reuters, palm oil refiners, faced with a margin squeeze from the recent implementation of zero crude palm oil export tax, are preparing themselves from an extension of zero duty tax, which will likely remain until next month.
Malaysian palm oil stocks are expected to fall to a five-month low in December to 2.02 million tonnes, down 11.4 per cent from November, a Reuter’s survey reported, due to monsoon floods disrupting harvesting and transportation.
In addition, output could drop 22.5 per cent to 1.36 million tonnes, while exports are expected to drop 1.5 per cent to 1.49 million tonnes.
On Monday, the price fell, due to crude oil sliding to five and a half year lows.
On Tuesday to Thursday, the price rose, as the ringgit weakened to a five and a half year low coupled with concerns that flooding in key harvesting states could harm the palm supply.
On Friday, the price fell, after reaching a six-month high, due to the strengthening ringgit coupled with investors taking profit after three consecutive days of gains.
Technical analysis
According to weekly FCPO chart, the price rose, testing top Bollinger band, and closing below.
In the coming week, there is a potential for price to fall towards RM2,300, and in the coming weeks, it could test the middle Bollinger band at RM2,200.
According to the daily FCPO chart, on Monday, the price dropped after initially climbing, testing psychological barrier 2,300.
However, it was unable to break and fell lower in the later session.
On Tuesday, the price rose, recovering losses made on the previous day, and testing psychological levels at RM2,300 as well as resistance line at RM2,310.
However, it fell in the later session, closing below psychological levels at RM2,300.
On Wednesday, the price continued to rise, closing above the resistance line at RM2,310, testing top Bollinger band, while remaining in an over-bought territory.
On Thursday, the price continued its upward trend, as the price tested resistance line at 2,350 and top the Bollinger band, closing above it.
On Friday, the price fell, closing below resistance line at RM2,350 and above Bollinger band.
In the coming week, the price has the potential to range between RM2,350 and RM2,250.
Resistance lines will be placed at RM2,390 and RM2,450, while support lines will be positioned at RM2,310 and RM2,250.
These will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report on January 12 (Monday) and January 15 (Thursday). MPOB report on January 12 (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.