Malaysian palm oil futures climbed higher on Friday to 2,269, due to tracking strengthening rival vegetable oils, coupled with support provided by a weak ringgit.
Future Crude Palm Oil (FCPO) benchmark September 2015 contract settled at 2,269 on Friday, down nine points or 0.4 per cent from 2,278 last Friday.
Trading volume increased to 158,665 contracts from 134,269 contracts from last Monday to Thursday.
Open interest based increased to 771,225 contracts from 761,695 contracts from last Monday to Thursday.
Cargo surveyor, Intertek Testing Services (ITS), reported that exports of Malaysia’s palm oil products during June increased 6.2 per cent to 1.649 million tonnes compared with 1.553 million tonnes during May.
Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during June increased 9.4 per cent to 1.696 million tonnes compared with 1.551 million tonnes during May.
Overall, demand weakened from the European Union (EU) and China as they reduced imports of palm oil this month, while demand strengthened from India, the rest of the sub-continent, and the US.
Spot ringgit weakened on Friday to 3.776, while touching a 10 year low earlier, after the Wall Street Journal reported that Prime Minister Datuk Seri Najib Tun Razak had close to US$700 million in deposits from troubled state fund 1MDB wired into his personal account.
The fund denied the report, said it never provided money to Najib.
Indonesia, the world’s top palm oil producer, said on Monday that it would now introduce a levy on palm exports on July 16, instead of July 1 as planned.
On Monday and Tuesday, the price fell, touching the lowest in a month, due to tracking overseas vegetable oils lower as cautious traders eyed the negative impacts of a possible default by Greece on its debt repayment.
On Wednesday, the price rose, recovering previous day’s losses, and rebounding from the lowest in a month, due to tracking other vegetable oils higher.
However, gains were limited with traders cautious due to Greece’s debt default.
On Thursday, the price reversed earlier losses to end flat, tracking other vegetable oils while a weak ringgit and concerns over an El Nino weather pattern provided support.
On Friday, the price rose to a one-week peak, while staying within a tight range, tracking rival vegetable oils higher with support provided by a weak ringgit.
Technical analysis
According to the weekly FCPO chart, the price opened and closed above the middle Bollinger band, and within sideways range at 2,220 to 2,290.
The price has stayed within the 2,200 to 2,300 range for the last three weeks and has been unable to break above the psychological barrier 2,300 or below the Fibonacci retracement level 50 at 2,220 (from the April 29 low of 2,070 ringgit to the June 8 high of 2,362).
According to the daily FCPO chart, on Monday, the price opened below the middle Bollinger band, and remained within sideways range at 2,220 to 2,290 and volume was lower than normal.
By the later session, the price tested the middle Bollinger band, closing below, and within sideways range.
On Tuesday, the price opened below the middle Bollinger band and sideways range 2,220 to 2,290, while volume was higher than normal. A downside gap formed from 2,265 to 2,245, which may be covered in near term or indicate break below sideways range 2,150 to 2,190.
By the later session, the price tested sideways support level 2,220, closing above, and below the middle Bollinger band, while previous gap was not able to be covered.
A bearish hanging man formed, indicating that there is potential to test the psychological barrier 2,200 in near term.
On Wednesday, the price opened below the middle Bollinger band, and within sideways range at 2,220 to 2,290, while the price covered previous day gap.
By the later session, the price closed within sideways range, and below the middle Bollinger band.
A bullish hammer candlestick formed, showing that the buyers had control of the market, and a market reversal after touching the sideways support level the previous day.
On Thursday, the price opened within sideways range and below the middle Bollinger band. A downside gap was formed from 2,270 to 2,250, this may be covered in near term or indicate potential to break below sideways support level 2,220.
By the later session, the price tested the middle Bollinger band, closing below, while remaining within sideways range 2,220 to 2,290 and previous gap was covered.
On Friday, the price opened above the middle Bollinger band, and within sideways range.
By the later session, the price tested the middle Bollinger band, closing above, while remaining within sideways range.
This coming week, the price has potential to range between 2,220 and 2,350. Resistance lines will be placed at 2,310 and 2,350, while support lines will be positioned at 2,210 and 2,150, these levels will be observed this coming week.
Major fundamental news this coming week
ITS and SGS report released on July 10 (Friday). MPOB report released on July 10 (Friday).
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.