Malaysian palm oil futures edged lower on Friday to 2,445, due to a strengthening ringgit, and coupled with slowing exports.
Future Crude Palm Oil (FCPO) benchmark April 2016 contract settled at 2,445 on Friday, down 14 points or 0.57 per cent from 2,459 last Friday.
Trading volume increased to 152,592 contracts from 130,084 contracts from last Tuesday to Thursday.
Open interest based decreased to 597,156 contracts from 627,764 contracts from last Tuesday to Thursday.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during January 1 to 25 decreased 8.5 per cent to 924,983 tonnes compared with 1.01 million tonnes during December 1 to 25.
Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during January 1 to 25 decreased 8.3 per cent to 931,173 tonnes compared with 1.015 million tonnes during December 1 to 25.
Overall, demand strengthened from China, while demand weakened from the European Union, Pakistan, the US, and India.
Spot ringgit strengthened on Friday to 4.15, heading for its biggest weekly gain since October, and touching a three month high, after Prime Minister Datuk Seri Najib Tun Razak cheered investors with measures to shore up the economy from falling commodities.
Indonesia’s export tax for crude palm oil will be zero per cent in February, unchanged from this month, a Trade Ministry official told Reuters on Thursday.
On Tuesday, the price rose, for the second consecutive day, due to expectations of lower output and as traders covered their short positions ahead of Chinese New Year holidays. However gains were limited, as crude oil prices resumed their decline.
On Wednesday, the price climbed by more than one per cent and touching the highest since June 2014, on tighter supplies levels.
On Thursday and Friday, the price fell, retracting lower after rising to a 20-month high in the earlier session, touching the lowest in a week due to a strengthening ringgit and coupled with slowing demand.
Technical analysis
According to the weekly FCPO chart, the price opened above the middle Bollinger band and psychological barrier 2,400. By the end of the week, the price tested the psychological barrier 2,500, closing below.
According to the daily FCPO chart, on Tuesday, the price opened and closed above the middle Bollinger band.
On Wednesday, the price opened and closed above the middle Bollinger band. By the later session, the price tested the top Bollinger band, closing below and tested the psychological barrier at 2,500 closing above, while the SO entered overbought territory.
On Thursday, the price opened below the top Bollinger band and psychological barrier at 2,500. The price tested the psychological barrier at 2,500 and top Bollinger band. By the later session, the price tested the resistance level at 2,490, closing below, while the SO remained in overbought territory.
On Friday, the price opened above the middle Bollinger band and below resistance level 2,490. A downside gap was formed from 2,465 to 2,480, which if able to be covered, could indicate potential to test resistance level 2,490.
By the later session, the previous gap was unable to be covered, while the price tested the middle Bollinger band, closing above while the SO exited overbought territory.
In the coming week, the price has the potential to range between 2,370 and 2,510.
Resistance lines will be placed at 2,510 and 2,550, while support lines will be positioned at 2,410 and 2,370, these levels will be observed this coming week.
Major fundamental news this coming week
ITS and SGS report released on February 2 (Tuesday). Malaysian Public Holiday, Federal Territory Day, on February 1 (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.