Crude Palm Oil Weekly Report January 9, 2016

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TA02183Malaysian palm oil futures bounced back on Friday after two days of losses as the market focuses on major industry report (MPOB) due early this coming week, which is expected to show a decline in production.

Future Crude Palm Oil (FCPO) benchmark March 2016 contract settled at 2,433 on Friday, down 47 points or 1.9 percent from 2,480 last Thursday. Trading volume increased to 153,559 contracts from 87,121 contracts from last Monday to Thursday.

Open interest based decreased to 775,388 contracts from 553,002 contracts from last Monday to Thursday.

Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during December decreased 5.4 per cent to 1.272 million tonnes compared with 1.345 million tonnes during November.

Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during December decreased 5.8 per cent to 1.272 million tonnes compared with 1.351 million tonnes during November.

Overall, demand strengthened from the India, while demand weakened from the EU and China.

Spot ringgit strengthened on Friday to 4.3750 while the ringgit fallen two per cent so far last week as sliding crude prices added to concerns over Malaysia’s falling oil and gas revenues and exports in November rose less than expected.

According to a Reuters survey, palm oil stocks in Malaysia has likely dropped in December and it is their first monthly decline since June 2015 as lower output due to a crop-damaging El Nino weather pattern offset a weakness in exports.

On Monday, the price fell at the start of 2016, as slowing exports and demand from top consumer China is unlikely to improve despite the upcoming Lunar New Year holiday.

On Tuesday, the price staged a turnaround on Tuesday and reversing earlier losses after traders forecast sharp falls in December output.

On Wednesday, the price recorded a fall as trader said that it was largely because of weak demand from major importer China.

On Thursday, the price fell and hitting a three-week low, due to weak export demand and a narrowing spread between the tropical oil and soybean oil.

On Friday, the price bounced back as market’s focus shifted to a major industry report (MPOB) due early this coming week, which is forecast to show a decline in production.

 

Technical analysis

According to the weekly FCPO chart, the price opened above the middle Bollinger band while the price fell after a doji candlestick last week.

By the end of the week, the price attempted to test the psychological level at 2,400, while the SO remained in overbought territory.

According to the daily FCPO chart, on Monday, the price opened lower at the first session, after SO showed a sell signal in overbought territory.

The price continued first session’s fall and closed 52 points lower at 2,433 on Monday while the market reached the middle Bollinger Band.

On Tuesday, market opened lower as the price reached a daily low at 2,421 and supported by the middle Bollinger band, the price retraced back and eventually closes higher at 2,452 while SO start to head downward and leave overbought territory.

On Wednesday, the price opened and attempted to test the middle Bollinger band while market was well supported by the middle Bollinger band as the price recovered and retraced 25 points higher eventually close at 2,454. SO continued to remain downward which may indicate that further selling pressure for the market.

On Thursday, the price opened gap down and below the middle Bollinger band as market failed to recover losses in first session and continued to move lower in second session, eventually close below the middle Bollinger band at 2,423.

So remained downward and the price closed below middle Bollinger band signal that market may retraced lower in short term.

On Friday, the price opened below the middle Bollinger band while the price retraced back and recovered from earlier session losses, eventually close unchanged at 2,433, above the middle Bollinger band.

A doji may indicate that indecision for next market direction.

This coming week, the price has potential to range between 2,495 and 2,385.

Resistance lines will be placed at 2,450 and 2,495, while support lines will be positioned at 2,385 and 2,330, these levels will be observed in the coming week.

 

Major fundamental news this coming week

ITS, SGS and MPOB report on January 11 (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.