Crude Palm Oil Weekly Report – May 21, 2016

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TA03009Malaysian palm oil futures climbed higher on Friday to 2,527, on short-covering Friday following two sessions of losses and as a survey showed exports picked up in May, but were on track for a more than two per cent fall on the week, likely its second straight weekly decline.

Future Crude Palm Oil (FCPO) benchmark August 2016 contract settled at 2,527 on Friday, down 59 points or 2.3 per cent from 2,586 last Friday.

Trading volume increased to 215,170 contracts from 207,625 contracts from last Monday to Thursday.

Open interest based increased to 1.121 million contracts from 1.0897 million contracts from last Monday to Thursday.

Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during May 1 to 15 increased 16.3 per cent to 563,172 tonnes compared with 484,271 tonnes during April 1 to 15.

Another cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during May 1 to 20 increased 6.5 per cent to 785,757 tonnes compared with 737,685 tonnes during April 1 to 20.

Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during May 1 to 15 increased 14.9 per cent to 574,548 tonnes compared with 499,918 tonnes during April 1 to 15.

Another report by Societe Generale de Surveillance (SGS) showed that Malaysia’s palm oil exports during 1st-20th May increased 9.4 per cent to 792,393 tonnes compared with 724,169 tonnes during 1st-20th April.

Overall, demand strengthened from the European Union, India and Pakistan, while demand weakened from the US and China.

Spot ringgit was unchanged on Friday to 4.0780, as traders adjusted positions ahead of the weekend, while the local currency was set for a third straight week of losses on growing views of a US interest rate increase as early as June.

Malaysia will increase its June crude palm oil export tax to 5.5 per cent from five per cent in May, according to a government circular.

On Monday, the price rose, ending three successive of declines, due to a weaker ringgit and data showed exports continued to grow in the first half of May.

On Tuesday, the price climbed for the second consecutive day, overcoming a stronger ringgit, as demand for the tropical oil ahead of the Muslim festival of Ramadan pushed up prices.

On Wednesday, the price reversed earlier gains, hitting the lowest in two weeks, as speculation over higher output and technical selling dragged the market lower. On Thursday, the price fell, hitting the lowest in nearly 10 weeks, as it tracked weaker performing rival oils in China.

On Friday, the price rebounded higher, after earlier touching the lowest in more than 10 weeks, on short-covering following two sessions of losses and as a survey showed exports picked up in May.

 

Technical analysis

According to the weekly FCPO chart, the price opened below the middle Bollinger band and psychological barrier at 2,600. By the end of the week the price tested the middle Bollinger band and psychological barrier at 2,600, closing below, while the SO entered oversold territory.

On Monday, the price opened below the middle Bollinger band and psychological barrier at 2,600. By the later session, the price tested the psychological barrier at 2,600, closing below. The price may attempt to cover the previous downside gap from 2,600-2,645, formed on May 13, which if able to be covered, could indicate potential to test the middle Bollinger band and resistance level 2,650.

On Tuesday, the price opened below the middle Bollinger band and psychological barrier at 2,600. An upside gap was formed from 2,585 to 2,600, which if able to be covered, could indicate potential to close below the psychological barrier at 2,600. By the later session, the previous gap was unable to be covered, and the price tested the psychological barrier at 2,600, closing below. A doji candlestick was formed as the price closed near the opening price, which could indicate indecision in the market.

On Wednesday, the price opened below the middle Bollinger band and psychological barrier at 2,600. An upside gap was formed from 2,600 to 2,610, which if able to be covered, could indicate potential to close below the psychological barrier 2,600.

By mid-day, the previous upside gap from 2,585 to 2,600, formed on May 16, was covered, which could indicate potential to test the psychological barrier at 2,500 in the near term, and the price tested the psychological barrier at 2,600, closing below. By the later session, the price tested the bottom Bollinger band and support level at 2,540, closing above.

On Thursday, the price opened above the bottom Bollinger band and support level at 2,550. By the later session, the price tested the bottom Bollinger band and support level at 2,540, closing below, while the SO entered oversold territory.

On Friday, the price opened below the bottom Bollinger band and above psychological barrier at 2,500. A downside gap was formed from 2,505 to 2,520, which if able to be covered, could indicate potential to test the support level at 2,540.

By the later session, the previous gap was covered, while the price tested the bottom Bollinger band, closing above, and tested support level at 2,540, closing below, while the SO remained in oversold territory.

In the coming week, the price has potential to range between 2,500 and 2,600.

Resistance lines will be placed at 2,575 and 2,650, while support lines will be positioned at 2,470 and 2,410, these levels will be observed in the next week.

 

Major fundamental news this coming week

ITS and SGS report released on May 25 (Wednesday).

 

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.