Malaysian palm oil futures edged lower on Friday to 2,592, as palm exports see a slowdown due to stronger demand for rival soyoil.
Future Crude Palm Oil (FCPO) benchmark July 2016 contract settled at 2,592 on Friday, down 97 points or 3.6 per cent from 2,689 last Friday.
Trading volume increased to 226,759 contracts from 202,998 contracts from last Monday to Thursday.
Open interest based increased to 1.063 million contracts from 1.054 million contracts from last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during April 1 to 25 increased 0.4 per cent to 889,944 tonnes compared with 886,749 tonnes during March 1 to 25.
Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during April 1 to 25 was unchanged to 883,225 tonnes compared with 883,225 tonnes during March 1 to 25.
Overall, demand strengthened from Pakistan, while demand weakened from the European Union, China, India and the US.
Spot ringgit weakened on Friday to 3.9030, as investors booked profits. Indonesia plans to set its May crude palm oil tax at US$3 per tonne, up from zero in April, according their trade ministry.
On Monday, the price fell for the second consecutive day, touching the lowest in more than a week, due to sluggish export demand, and as traders forecast rising production in line with the seasonal trend.
On Tuesday, the price rebounded from a one-week low hit during the previous session, supported by a decline in the ringgit against the dollar, but gains are likely to be limited due to higher production and weak exports.
On Wednesday, the price fell, touching the lowest in nearly two weeks, as the ringgit recovered from a one-week low against the dollar and as traders cashed in on slow exports and improving output.
On Thursday, the price declined for the second consecutive day, touching a seven-week low, due to tracking poor performing rival vegetable oils and on bearish local sentiment, driven by rising output and weak export demand.
On Friday, the price fell for the third consecutive day, touching a new seven-week low, as palm exports see a slowdown due to stronger demand for rival soyoil.
Technical analysis
According to the weekly FCPO chart, the price opened below the top Bollinger band and psychological barrier at 2,700.
By the end of the week, the price tested the middle Bollinger band and psychological barrier at 2,600 closing above.
According to the daily FCPO chart, on Monday, the price opened and closed below the middle Bollinger band and psychological barrier at 2,700.
By the later session, the price covered the previous upside gap from 2,670 to 2,685, formed on April 19, which could indicate potential to test the support level at 2,650 in the near term.
On Tuesday, the price opened below the middle Bollinger band and above support level at 2,650.
An upside gap was formed from 2,655 to 2,675, which if able to be covered, could indicate potential to test support level 2,650. By the later session, the previous gap was covered, while the price tested the support level at 2,650, closing above.
A dragon-fly doji candlestick was formed, which indicates that buyers increased during the later session, causing the price to close above support level 2,650.
On Wednesday, the price opened below the middle Bollinger band and above support level at 2,650.
A downside gap was formed from 2,665 to 2,675, which if able to covered, could indicate potential to test the psychological barrier at 2,700.
By the later session, the previous gap was covered, while the price tested the support level at 2,650, closing below.
On Thursday, the price opened above the bottom Bollinger band and psychological barrier at 2,600.
A downside gap was formed from 2,600 to 2,635, which if able to be covered, could indicate the potential to test support level at 2,650.
By the later session, the previous gap was unable to be covered, as the price tested the support level at 2,590. However, it was unable to remain below and the price rebounded higher, closing above the bottom Bollinger band and psychological barrier at 2,600.
On Friday, the price opened below the bottom Bollinger band and support level at 2,590, while the SO entered oversold territory. A downside gap was formed from 2,575 to 2,600, which if able to be covered, could indicate potential to close above the bottom Bollinger band and psychological barrier at 2,600.
By the later session, the previous gap was covered, and the price tested the bottom Bollinger band, closing above, and tested psychological barrier at 2,600, closing below.
In the coming week, the price has potential to range between 2,550 and 2,700. Resistance lines will be placed at 2,650 and 2,710, while support lines will be positioned at 2,550 and 2,490, these levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report released on May 3 (Tuesday). Malaysian Public Holiday, Labour Day, on May 2 (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.