Malaysian palm oil futures edged lower on Friday to 2,154, as the ringgit headed for a weekly gain against the dollar, coupled with weakness in rival vegetable oil markets.
Future Crude Palm Oil (FCPO) benchmark July 2015 contract settled at 2,154 on Friday, up four points or 0.2 per cent from 2,150 last Friday.
Trading volume decreased to 177,579 contracts from 207,126 contracts from last Monday to Thursday.
Open interest based on decreased to 684,278 contracts from 711,386 contracts from last Monday to Thursday.
Cargo surveyor, Intertek Testing Services (ITS), reported that exports of Malaysia’s palm oil products during April 1 to 20 increased 9.6 per cent to 701,560 tonnes compared with 640,254 tonnes during March 1 to 20.
Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during April 1 to 20 increased 8.3 per cent to 706,753 tonnes compared with 652,837 tonnes during March 1 to 20.
Overall, demand rose from China, the US and the European Union, while demand weakened from India and Pakistan.
Spot ringgit strengthened on Friday to 3.5780, touching a two-week high, as a rebound in oil prices eased concerns over lower crude’s impact on current and fiscal accounts of the net oil exporter.
The Malaysian Palm Oil Association (MPOA) forecasted that output rose 17 per cent from April 1 to 20 compared with the same period a month before. In March, Malaysian output surged 33.3 per cent to 1.49 million tonnes, the biggest ever month-on-month rise.
On Monday, the price rose, while staying within a tight range, due to encouraging export data. However, a strengthening ringgit and a bearish technical viewpoint kept a lid on gains.
On Tuesday, the price continued to climb, while touching a two week high, as the ringgit retreated coupled with positive technical outlook increased buying momentum.
On Wednesday, the price fell, due to the ringgit rebounding, paired with investors anticipating a bearish technical outlook. Rival vegetable oil markets in the US and China weakened, adding to the pressure on the tropical oil.
On Thursday, the price closed flat, as expectation of another month of strong crude palm production pressured the price lower. However, this was countered by strong overseas demand, supporting the price.
On Friday, the price stayed within a tight range, as strong buying interest was offset by weakness in rival vegetable oil markets coupled with a strengthening ringgit.
Technical analysis
According to weekly FCPO chart, the price fell, while staying within this week’s consolidation range of 2,140 to 2,190. The price was unable to test the psychological barrier at 2,200. There is a potential for the SO to enter oversold territory.
According to the daily FCPO chart, on Monday, the price initially opened above the middle Bollinger band. The price then fell, closing below the middle Bollinger band.
On Tuesday, the price, opened below middle Bollinger band. The price then rose, while testing the middle Bollinger band and the resistance line at 2,195, closing below.
On Wednesday, the price opened below the middle Bollinger band, and the price fell. In the later session, the price rose, recovering some earlier losses, testing the middle Bollinger band, closing below. The price continued to remain with this week’s consolidation range of 2,130 to 2,190.
On Thursday, the price fell, testing the lower region’s sideways range at 2,135 to 2,140. In the later session, the price rose, recovering earlier losses, while testing the middle Bollinger band, and subsequently, closing below. A dragon-fly doji candlestick was formed, indicating investors are awaiting clearer market direction.
On Friday, the price opened above the middle Bollinger band. The price fell, testing the middle Bollinger band, and closing below.
In the coming week, the price has the potential to range between 2,100 and 2,200. Resistance lines will be placed at 2,210 and 2,150, while support lines will be positioned at 2,110 and 2,050, these levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report released on April 27 and 30 (Monday and Thursday).
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.