Malaysian palm oil futures edged lower on Friday to 2,217, due to the strengthening ringgit.
Future Crude Palm Oil (FCPO) benchmark December 2015 contract settled at 2,217 on Friday, down 169 points or 7.6 per cent from 2,386 last Friday.
Trading volume decreased to 211,623 contracts from 252,902 contracts from last Monday to Thursday.
Open interest based decreased to 746,822 contracts from 751,247 contracts from last Monday to Thursday.
Spot ringgit strengthened on Friday to 4.125, heading for its biggest weekly advance since 1998, as surging crude oil prices brightened prospects for Malaysia’s economy.
Malaysia plans to minimise imports of crude palm oil in an effort to reduce stockpiles of the edible oil to manageable levels of around two million metric tonnes, a government minister said on Tuesday. The move would add to the increased use of biodiesel and a replanting incentive scheme as the government works to manage local stockpile levels, said Datuk Amar Douglas Uggah Embas, minister for plantations, industries and commodities.
According to a Reuter’s survey released on Thursday, Malaysian palm oil stocks in September could have reached their highest in nearly three years, while gaining for the third straight month as record production levels out pace increasing export demand. Local inventories could rise as much as 6.2 per cent in September to 2.65 million tonnes, according to a median survey of five planters, traders and analysts. Malaysian palm oil exports likely increased 2.6 per cent to 1.65 million tonnes, according to the survey participants.
On Monday, the price rose, due to strong gains in rival oilseed and crude oil prices, coupled with data this week showed Malaysian exports and the trade surplus exceeded economists’ estimates.
On Tuesday, Wednesday, the price fell, touching the lowest in a week, after a rally last month that lifted prices to a 15-month high, as demand shifted for the tropical oil to rival Indonesia, and coupled with a strengthening ringgit.
On Thursday, the price declined for the third consecutive day, touching the lowest in nearly two weeks, as a bearish outlook weighs on key data that is expected to be released in the coming week and a stabilising ringgit dampened market sentiment.
On Friday, the price fell, for the fifth successive day, touching the lowest in two and half weeks as the ringgit strengthened.
Technical analysis
According to the weekly FCPO chart, the price opened above the middle Bollinger band and psychological barrier at 2,400. By the end of the week the price tested the top Bollinger band and psychological barrier at 2,300, closing below.
According to the daily FCPO chart, on Monday, the price opened above the middle Bollinger band and psychological barrier at 2,400, while the SO remains in overbought territory. An upside gap was formed from 2,385 to 2,405, which might be covered in the near term or indicate a potential to break above the psychological barrier at 2,400. By the later session, the previous gap was unable to be covered, while the price tested the psychological barrier at 2,400, closing above. Daily volume was above the average daily volume.
On Tuesday, the price opened above the middle Bollinger band and psychological barrier at 2,400. An upside gap was formed from 2,415 to 2,430, which may be covered in the near term or indicate a potential to test the resistance level at 2,450 in the near term. By the later session, the previous gap was covered, while price tested the psychological barrier at 2,400, closing below.
On Wednesday, the price opened below the top Bollinger band and psychological barrier at 2,400, while the SO exited overbought territory. By the later session, the price tested the support at level 2,310, closing above.
On Thursday, the price opened above the middle Bollinger band and support level at 2,310. By the later session the price tested the middle Bollinger band and support level at 2,250, closing above, while the price covered previous upside gap from 2,250 to 2,285 during September. Daily volume was double the average daily volume. A bearish hammer candlestick was formed, indicating a potential to break below the support level at 2,250 and test the psychological barrier at 2,200 in the near term.
On Friday, the price opened below the middle Bollinger band and below the support level at 2,250. A downside gap was formed from 2,240 to 2,275, which might be covered in the near term or indicate a potential to test the psychological barrier at 2,200. By the later session, the price tested the middle Bollinger band and support level at 2,250, closing below.
In the coming week, the price has potential to range between 2,300 and 2,400.
Resistance lines will be placed at 2,290 and 2,350, while support lines will be positioned at 2,190 and 2,150, these levels will be observed this coming week.
Major fundamental news this coming week:
ITS and SGS report released on October 12 (Monday) and October 15 (Thursday).
MPOB report released on October 12 (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.