Malaysian palm oil futures climbed higher on Friday to 2,340, due to the weakening ringgit. However, weak overseas soy-oil markets kept a lid on gains.
Future Crude Palm Oil (FCPO) benchmark August 2015 contract settled at 2,340 on Friday, up 123 points or 5.55 per cent from 2,217 last Friday.
Trading volume increased to 146,018 contracts from 145,524 contracts last Monday to Thursday.
Open interest based increased to 702,058 contracts from 672,192 contracts last Monday to Thursday.
Cargo surveyor, Intertek Testing Services (ITS), reported that exports of Malaysia’s palm oil products during May increased 45 per cent to 1.553 million tonnes compared with 1.073 million tonnes during April.
Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during May increased 44 per cent to 1.55 million tonnes compared with 1.077 million tonnes during April.
Overall, demand rose from the EU, India and China, while demand weakened from the US.
Spot ringgit weakened on Friday to 3.717, as lower oil prices increased concerns that sliding crude might hurt the country’s trade and fiscal account.
According to a Reuter’s survey, Malaysian palm oil stocks for May are estimated at 2.14 million tonnes, down 2.4 per cent from April, and Malaysian palm oil production for May was at 1.79 million tonnes, up 5.4 per cent from April.
Malaysia’s palm oil exports for May are expected to be at 1.61 million tonnes, up 36.6 per cent from April, the biggest increase since October 2006.
On Monday and Tuesday, the price rose, touching the highest in 3 months, due to tracking strengthening overseas soy-oil markets, coupled with strong exports for May, and supported by a weakening ringgit.
On Wednesday, the price fell, ending its four consecutive days of gains, as the ringgit strengthened, coupled with the price tracking a rebound in overseas soy-oil markets.
On Thursday and Friday, the price climbed, recovering the previous day’s losses, due to anticipation the ringgit which is expected to continue to weaken and due to market’s expectation of an increase in purchases of refined palm oil from the world’s biggest edible oil consumer; India. However, weak comparative overseas soyoil markets limited gains.
Technical analysis
According to the weekly FCPO chart, the price opened above middle Bollinger band, establishing confirmation of breaking above the previous week’s consolidation range at 2,140 to 2,190. The price tested top Bollinger band, closing below. The price closed above middle Bollinger band for the first time since the beginning of March.
According to the daily FCPO chart, on Monday, the price opened above the top Bollinger band and the resistance line at 2,250. The SO entered overbought territory, while the top Bollinger band has begun to expand upwards. An upside gap from 2,220 to 2,260 was formed, indicating that there is potential for an uptrend in the near term. By the later session, the price closed above the top Bollinger band and the resistance line at 2,250.
On Tuesday, the price opened above the psychological level at 2,300, resistance line at 2,310, and the top Bollinger band. Another upside gap was formed from 2,295 to 2,330, indicating that there is potential to continue on the upward trend. By the later session, the price closed above the resistance line at 2,310, while SO remained in overbought territory.
On Wednesday, the price opened above the resistance line at 2,310 and the top Bollinger band. In the early session, the price covered the previous day’s upside gap from 2,295 to 2,330.
By the later session, the price closed below the top Bollinger band and the psychological level at 2,300. A bearish shooting star candlestick formed, indicating a potential reversal.
On Thursday, the price opened below the psychological barrier at 2,300 and the top Bollinger band. By the later session, the price tested the resistance line at 2,310 and the top Bollinger band, closing above.
On Friday, the price opened above the resistance line at 2,310, and below the top Bollinger band. The price tested the psychological barrier at 2,300, while the SO remained in overbought territory. By the later session, the price closed above the resistance line at 2,310 and top Bollinger band.
In the coming week, the price has potential to range between 2,250 and 2,400.Resistance lines will be placed at 2,390 and 2,450, while support lines will be positioned at 2,310 and 2,250. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report released on June 10 (Wednesday). MPOB report released on June 10 (Wednesday).
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.