Malaysian palm oil futures continued to range bounce between 3,177 and 3,052 for the week on expectation for 12 per cent increased production in 2017 and strengthening ringgit.
Crude palm oil futures (FCPO) benchmark April 2016 contract settled at 3,102 on Friday, dropping 16 points or 0.5 per cent from 3,118 last Friday.
Trading volume decreased to 169,243 contracts from 227,041 contracts from last Monday to Thursday.
Open interest based increased to 801,464 contracts from 810,558 contracts from last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during January 1 to 20 rose 17.5 per cent to 739,367 tonnes compared with 338,777 tonnes during December 1 to 20.
Socete Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products for January 1 to 20 rose 20.8 per cent to 733,002 tonnes from 606,937 tonnes shipped during December 1 to 20.
Spot ringgit stuck around 4.45, as the greenback lost its grip following less hawkish comments from Federal Reserve (Fed) chair Janet Yellen on Thursday who commented that the US monetary policy is still accommodating and would continue to raise interest rates slowly so as not to harm the recovery which the Fed has sought to nurture.
The MPOB data showed a surprise rise in end-stocks to 1.67 million tonnes as output fell more than forecast, down 6.4 per cent from November to 1.47 million tonnes.
Exports, however, fell 7.5 per cent in December from a month earlier.
On Monday, Bursa Malaysia Derivatives market rose on Monday, helped by improving export demand and strong commodity prices due to tight supplies.
On Tuesday, palm oil rose more than one per cent on Tuesday, tracking earlier gains in rival oilseed soy and supported by bullish sentiment on tight market supplies recorded in the evening.
On Wednesday, the crude palm oil market gained on a strengthening ringgit and on forecasts of higher production.
On Thursday, the market failed to break above the sideway trend and instead fell deeper to reach a new low, confirming that the market would head downward and test a bottom of 3,059.
On Friday, Malaysian palm oil futures declined nearly one per cent as rival oilseed soy narrowed. It also declined on weaker related oils on China’s Dalian Commodity Exchange.
Technical analysis
According to the weekly FCPO chart, candlesticks failed to break and stay above 3,172 for the second time, suggesting that the market would continue in limited sideway range in the near term. On Monday, the market opened gap-down due to the price difference but it rebounded sharply to close at an intraday high creating uncertainties on market direction as it failed to penetrate below the sideway bottom.
On Tuesday, daily candlesticks climbed higher to test the upside of the sideway trend, providing hope that the market might be able to break higher and reach the next resistance of 3,300.
On Wednesday, daily candlesticks tested both high and low of the day but was unable to maintain gains and closed in negative territory, suggesting strong resistance at 3,200.
On Thursday, the market direction remained uncertain while the market potentially headed downward as the market failed to break and stay above 3,200.
On Friday, the market fell lower, heading towards the lower Bollinger band which can serve as next temporary support.
In the upcoming week, the price has the potential to range between 3,177 and 3,058.
Resistance lines will be placed at 3,241 and 3,177, support lines will be positioned at 3,058 and 3,027, these levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report released January 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.