Crude Palm Oil Weekly Report – July 11, 2015

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TA00815Malaysian palm oil futures climbed higher, extending gains from the previous session after inventories dropped for the first time since February on the back of lower output and a jump in exports in June.

Future Crude Palm Oil (FCPO) benchmark September 2015 contract settled at 2,192 on Friday, down 77 points or 3.4 per cent from 2,269 last Friday.

Trading volume increased to contracts from 158,984 contracts from last Monday to Thursday.

Open interest based decreased to 767,193 contracts compared with from last Monday to Thursday.

Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during July 1 to 10 decreased 32.5 per cent to 316,492 tonnes compared with 468,677 tonnes during June 1 to 10.

Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during July 1 to 10 decreased 34.7 per cent to 308,875 tonnes compared with 473,307 tonnes during June 1 to 10

The Malaysian Palm Oil Board (MPOB) showed that Malaysian palm oil stocks in June dropped for the first time since February to 2.15 million tonnes as output declined in the world’s second biggest producer of the tropical oil and exports rose during the Muslim holy month of Ramadan.

Overall, demand weakened from India, China, and the European Union (EU) which could signal a slowdown from buying seen last month.

Spot ringgit strengthened on Friday to 3.7937 after Malaysia’s central bank held its overnight policy rate at 3.25 per cent on Thursday and bullish Malaysia’s industrial production on Friday supported the ringgit.

On Monday, the price fell, continuing to retreat from a month high during the previous day, as stocks and commodities slid after Greece rejected terms of a bailout package, raising risk of a global financial crisis.

On Tuesday, the price fell for a second consecutive day, due to concerns over Greece’s position in the eurozone and weakness in rival soybean oil, although losses were limited by expectations of lower production.

On Wednesday, the price slid for a third session on Wednesday, falling three per cent to a six-week low as Chinese stocks tumbled and the Greek debt crisis continued to hammer markets.

On Thursday, the price edged up and recovering from the previous session’s six-week low amid expectations of lower June production data and an uptick in Asian shares.

On Friday, the price rose on Friday as MPOB showed inventories dropped for the first time since February on the back of lower output and a jump in exports in June.

 

Technical analysis

According to the weekly FCPO chart, the price opened above the middle Bollinger band, and within the previous week sideways range.

The price has stayed within the sideways range of 2,220 to 2,290 for the last three weeks.

If the price breaks below sideways support, there is a possibility of entering the previous consolidation range of 2,130 to 2,190. However, if it breaks above the sideways resistance, the price could test the psychological barrier of 2,300 and the resistance level of 2,350.

According to the daily FCPO chart, on Monday, the price opened below the middle Bollinger band, while forming a downside gap from 2,245 to 2,270, and remaining within sideways range from 2,220 to 2,290.

The gap formed could be covered in the near term, or it could be an indication of the market’s direction towards sideways support level 2,220 and the psychological barrier of 2,200.

By the later session, the price closed below the middle Bollinger band, and within sideways range, while the daily volume was above average.

The previous gap was not covered, indicating that there is potential for a beginning of a downtrend towards the psychological barrier at 2,200.

On Tuesday, the price opened below the middle Bollinger band, which indicates that the price might test the psychological barrier at 2,200.

By the later session, the price continued to fall, attempting to test the psychological barrier at 2,200, eventually closed at 2,210.

On Wednesday, the price opened gap down and the psychological barrier 2,200 has been broken in the earlier session. By the later session, the price closed at 2,152 and a doji pattern has been form which could potentially indicate indecisiveness among the market.

The Bollinger band showed that the daily candlesticks were totally out of the band range which indicate that the market stayed in oversold condition.

On Thursday, the price opened gap up and technically rebounded, while the Bollinger band exited oversold territory. In second session, the price closed at 2,185 and covered part of the price gap which created on the previous day.

On Friday, the price attempting to test the psychological barrier at 2,200 and fully covered the price gap.

It eventually closed at 2,192, below the psychological barrier of 2,220.

The Bollinger band indicated that market might continue its current downtrend as all Bollinger bands do not show any sign of changing direction yet.

In the coming week, the price has the potential to range between 2,100 and 2,185. Resistance lines will be placed at 2,245 and 2,285, while support lines will be positioned at 2,100 and 2,130. These levels will be observed this coming week.

 

Major fundamental news this coming week

ITS and SGS report released on July 15 (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.