Malaysian palm oil futures climbed higher on Wednesday to 2,486, buoyed by low production data from a regional palm oil association, and coupled with worries that the El Nino effect may harm production.
Future Crude Palm Oil (FCPO) benchmark March 2016 contract settled at 2,486 on Wednesday, up 84 points or 3.5 per cent from 2,402 last Friday.
Trading volume decreased to 68,219 contracts from 96,772 contracts from last Monday to Tuesday.
Open interest based decreased to 377,846 contracts from 396,543 contracts from last Monday to Tuesday.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during December 1 to 20 decreased 24.9 per cent to 728,421 tonnes compared with 970,057 tonnes during November 1 to 20.
Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during December 1 to 20 decreased 25.1 per cent to 744,563 tonnes compared with 993,943 tonnes during November 1 to 20.
Overall, demand strengthened from Pakistan and the US, while demand weakened from China, India, and the EU.
Spot ringgit weakened on Friday to 4.3070, as investors trimmed their long dollar positions after the US Federal Reserve raised interest rates on December 16 and signalled that further tightening would be gradual.
On Monday, Tuesday, and Wednesday, the price rose, touching the highest in 18 months, due to a weakening ringgit, coupled with worries that the El Nino effect may harm production, boosting prices, and buoyed by low production data from a regional palm oil association.
Technical analysis
According to the weekly FCPO chart, the price opened and closed above the middle Bollinger band and psychological barrier at 2,400, while the SO remained in overbought territory.
According to the daily FCPO chart, on Monday, the price opened above the middle Bollinger band and psychological barrier at 2,400. An upside gap was formed from 2,400-2,420, which if able to be covered, may indicate potential to break below the psychological barrier at 2,400. By the later session, the previous gap was unable to be covered, while the price tested resistance level 2,450 and top Bollinger band, closing below.
On Tuesday, the price opened below the top Bollinger band and resistance level at 2,450. By the later session, the price tested the top Bollinger band and resistance level at 2,450, closing above, while the SO entered overbought territory.
On Wednesday, the price opened below the top Bollinger band and above resistance level at 2,450. A downside gap was formed from 2,460 to 2,470, which if able to be covered, may indicate potential to test resistance level 2,490. By the later session, the previous gap was able to be covered, while the price tested top Bollinger band, closing above, and tested the resistance level at 2,490, closing below, while the SO remained in overbought territory.
This coming week, the price has potential to range between 2,400 and 2,500.
Resistance lines will be placed at 2,510 and 2,550, while support lines will be positioned at 2,410 and 2,350, these levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report released on December 28 (Monday) and December 31 (Thursday).
Malaysian Public Holiday, New Years Day on January 1 (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.
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