Crude Palm Oil Weekly Report – October 23, 2016

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ta04316Malaysian palm oil futures rose and closed at 2,724 on weaker ringgit support and expectation for tighter global supply.

Crude palm oil futures (FCPO) benchmark January 2016 contract settled at 2,724 on Friday, up 59 points or 2.2 per cent from 2,665 last Friday.

Trading volume decreased to 215,483 contracts from 183,135 contracts from last Monday to Thursday.

Open interest based increased to 795,645 contracts from 756,554 contracts from last Monday to Thursday.

Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during October 1 to 20 fell 12.4 per cent to 800,854 tonnes compared with 914,264 tonnes during September 1 to 20.

Socete Generale de Surveillance (SGS) report showed that Malaysia’s palm oil exports during October 1 to 20 fell 12.1 per cent to 806,458 tonnes compared with 917,288 tonnes during September 1 to 20.

Overall, demand increase from Europe Union while demand remained weakened from India and China. Spot ringgit has dropped 0.36 per cent throughout this week to 4.1830 ended marginally lower against the US dollar on lack of buying interest.

The head of the programme operator said on Wednesday that Indonesia has raised its target for funds collection in 2017 for its biodiesel subsidy programme by nearly 14 per cent from this year on the expectation of higher palm oil exports.

On Monday, the price rose to six-month high as the price supported by weaker ringgit and tracking rival oil market gains.

On Tuesday, the price retraced back from two and a half years high as concerns about weak export demand and profit taking.

On Wednesday, crude palm oil market rose as tracking competing rival oil markets gains while crude oil market continue underpinned the vegetable oil market.

On Thursday, the crude palm oil market unable to retain earlier gains and fell as low export expectation weigh on market sentiment.

On Friday, the price rose as supported by weaker ringgit and weaker palm oil production as of late may be the delayed result of last year’s El Niño.

 

Technical analysis

According to the weekly FCPO chart, weekly candlestick test and retraced back from the upper Bollinger Band and current market stayed away from overbought condition. By the end of the week, MACD remained above the zero line, indicating that the current uptrend should remain valid in long term.

On Monday, the price rose and closed above the upper Bollinger Band which might indicate that current market stayed at overbought condition. MACD showed a bullish crossover above zero line which provided bullish signal in short term.

On Tuesday, the price retraced back from the upper Bollinger Band and the current market stayed away from overbought condition.

MACD remained above the zero line and indicated that current uptrend remained valid. A bearish ‘Engulfing’ candlestick should be monitored closely as the following candlestick pattern might provide short term bearish signal.

On Wednesday, the Bollinger Bands showed expanding signs which could indicate that indicate that there is an increase in price volatility.

A daily ‘Doji’ candlestick pattern might indicate indecision for the next market direction in short term.

On Thursday, the price fell as the Bollinger Bands showed further expanding sign and this might indicate that the current market price might continue to stay at volatile condition.

On Friday, the price rose and remained underpinned by the middle Bollinger Band while MACD showed a potential crossover above the zero line while a crossover may provide bullish signal in short term.

In the coming week, the price has potential to range between 2,780 and 2,650.  Resistance lines will be placed at 2,825 and 2,780, support lines will be positioned at 2,650 and 2,605, these levels will be observed in the coming week.

 

Major fundamental news this coming week

ITS and SGS report released on October 25 (Tuesday).

 

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.