Malaysian palm oil futures edged lower on Friday to 2,679, tracking competing vegetable oils.
Future Crude Palm Oil (FCPO) benchmark June 2016 contract settled at on Friday 2,679, down 69 points or 2.5 percent from 2,748 last Friday.
Trading volume decreased to 156,127 contracts from 172,285 contracts from last Monday to Thursday.
Open interest based increased to 1,007,698 contracts from 990,582 contracts from last Monday to Thursday.
Spot ringgit strengthened on Friday to 3.9000, as crude oil prices continue to rebound higher towards the US$40 per barrel level, and coupled with a weakening USD.
According to a Reuter’s survey, Malaysian palm oil stocks are expected to drop below two million tonnes, and would be the lowest since stocks hit 1.86 million tonnes in March 2015.
Malaysian palm oil production is forecasted to be at the weakest level since 2007.
Malaysian inventories likely touched 1.95 million tonnes at end-March, down 10.3 per cent from February, the survey of nine planters, traders and analysts showed.
The survey pegged output at 1.13 million tonnes, eight per cent higher than February but the smallest production for the month of March in nine years.
Finally, Malaysian palm oil exports are projected at Malaysia’s 1.22 million tonnes, up 12.4 per cent on month, given improved demand from India and China ahead of the Muslim holy month of Ramadan and an export tax implementation in April.
On Monday, the price rose for a second consecutive day, due to a weakening ringgit and tracking competing vegetable oils higher.
On Tuesday, the price reversed earlier gains, as the market took profits in anticipation of higher than expected end-stocks.
On Wednesday, the price declined for a second consecutive day, touching the lowest in nearly two weeks, due to better than expected production forecasts and weak export demand.
On Thursday, the price reversed earlier gains, as weaker demand weighed on prices and traders took profits ahead of official data due next week.
On Friday, the price fell for a 4rd consecutive day, tracking competing vegetable oils.
Technical Analysis
According to the weekly FCPO chart, the price opened below top Bollinger band and above psychological barrier at RM2,700, while the SO remained in overbought territory.
By the end of the week, the price tested top Bollinger band and psychological barrier at RM2,700 closing below, while the SO remained in overbought territory.
According to the daily FCPO chart, on Monday, the price opened below top Bollinger band and above psychological barrier at RM2,700.
A downside gap was formed from RM2,735 to RM2,750, which if covered, could indicate potential to test resistance level at RM2,790 in the near term.
By the later session, the previous gap was covered, while the price closed below top Bollinger band.
On Tuesday, the price opened below top Bollinger band and above psychological barrier at RM2,700.
A downside gap was formed from RM2,765 to RM2,775, which if covered, could indicate potential to test resistance level at RM2,790.
By the later session, the previous gap was covered, and the price tested resistance level at RM2,790, closing below, while the SO entered overbought territory.
On Wednesday, the price opened below top Bollinger band and resistance level at RM2,790, while the SO exited overbought territory.
A downside gap was formed from RM2,735 to RM2,755, which if covered, could indicate potential to test resistance level at RM2,790.
By the later session, the previous gap was unable to be covered, while the price tested support level at RM2,710, closing above.
On Thursday, the price opened below top Bollinger band and above support level at RM2,710.
An upside gap was formed from RM2,725 to RM2,730, which if covered, could indicate potential to test psychological barrier at RM2,700.
By the later session, the previous gap was covered, while the price tested support level at RM2,710, closing above.
On Friday, the price opened below middle Bollinger band and on psychological barrier at RM2,700.
A downside gap was formed from RM2,700 to RM2,710, which if covered, could indicate potential to close above resistance level at RM2,710.
By the end of the morning session, the previous gap was covered, while the price tested middle Bollinger band, closing above, and tested resistance level at RM2,710, closing below.
By the later session, the price tested middle Bollinger band and psychological barrier at RM2,700, closing below.
Next week, the price has potential to range between RM2,650 and RM2,800.
Resistance lines will be placed at RM2,750 and RM2,790, while support lines will be positioned at RM2,640 and RM2,590, these levels will be observed next week.
Major fundamental news this coming week
ITS and SGS report released on April 11 (Monday) and on April 15 (Friday) MPOB report released on April 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.