Malaysian palm oil futures were pressured lower on Friday to 2,136, eradicating previous day gains, due to increasing concern among investors about the sustainability of the robust export demand seen this month.
Future Crude Palm Oil (FCPO) benchmark August 2015 contract settled at 2,136 on Friday, down 53 points or 2.48 per cent from 2,189 last Friday.
Trading volume decreased to 147,097 contracts from 173.549 contracts from last Monday to Thursday. Open interest based decreased to 696,970 contracts from 727,400 contracts from last Monday to Thursday.
Cargo surveyor Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during May 1 to 20 increased 53 per cent to 1.07 million tonnes compared with 701,560 tonnes during April 1 to 20.
Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during May 1 to 20 increased 48 per cent to 1.047 million tonnes compared with 706,753 tonnes during April 1 to 20.
Overall, demand from the European Union (EU), China and India strengthened as they doubled purchases this month, while demand weakened from the US.
Spot ringgit weakened on Friday to 3.5835 due to a rebound in oil prices which eased concerns that lower crude might hurt the country’s trade and fiscal accounts. Malaysia is a net oil exporter.
On Monday, Tuesday, Wednesday, the price fell, touching the lowest in almost three weeks, due to tracking weakening competing vegetable oil markets.
However, the price was supported by a weakening ringgit and encouraging export figures. On Thursday, the price rose, ending four consecutive days of decline, recovering the previous session’s losses, as weak prices attracted buying interest for the tropical oil.
On Friday, the price fell, eliminating the previous day’s gains, due to rising scepticism among investors about the continuation of robust export demand seen this month.
Technical analysis
According to the weekly FCPO chart, the price opened within the consolidation range of 2,135 to 2,195. The price tested lower level of consolidation range, closing above.
There is a potential for the price to test the psychological barrier at 2,100 next week.
According to the daily FCPO chart, on Monday and Tuesday, the price stayed within a tight range while volume remained lower than usual. The price opened and closed within previous week consolidation range. The price tested middle Bollinger band, closing below.
On Wednesday, the price opened below the support line at 2,140. A downward gap was formed, indicating to market players that the gap could be covered in near term.
The price closed above the support line at 2,140, which was the lower level of consolidation range, as gap was covered in the later session.
On Thursday, the price opened and closed above the support line at 2,140. By the later session, the price rebounded higher after testing the lower level of consolidation range.
The price tested the middle Bollinger band, closing below. On Friday, the price opened and closed below the middle Bollinger band.
The price tested the support line at 2,140, closing below, while the SO approaches oversold territory. The price closed above the lower level of consolidation range 2,135. In the coming week, the price has the potential to range between 2,100 and 2,200.
Resistance lines will be placed at 2,190 and 2,240, while support lines will be positioned at 2,090 and 2,040. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report released on May 25 (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.