Malaysian palm oil futures pared some losses after hitting the lowest level in more than a month, as the market expectation on subdued demand after Ramadan begins and weaker performance of related edible oils on the Chicago Board of Trade (CBOT) and China’s Dalian Commodity Exchange has been offset by the weakened ringgit.
Benchmark crude palm oil futures (FCPO) for August delivery contract slid 2.27 per cent to close at RM2,496, RM58 lower than RM2,554 on last Friday.
Total trading volume during Monday to Thursday rose 20.56 per cent to 204,373 contracts, comparing to 169,524 contracts traded during the same period in the previous week.
Open interest over Monday to Thursday up 2.76 per cent to 832,412 contracts from 810,051 contracts during the same period in the previous week.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oils in May increased 180,432 tonnes or 16.02 per cent to 1,306,374 tonnes from 1,125,942 tonnes exported in April.
Societe Generale de Surveillance (SGS) reported that shipment of Malaysian palm oil products in May up 174,980 tonnes or 15.41 per cent to 1,310,320 tonnes from 1,135,340 tonnes shipped in April.
Both cargo surveyors’ data showed a strong demand in export for palm oil related products in May as buyers of the tropical oil usually stock up on purchases one to two months ahead of Ramadan, which this year began on last Saturday.
However, the demand of palm oils is expected to be weakened once Ramadan begins.
Spot ringgit depreciated 0.27 per cent to 4.2815 against the US dollar compared to 4.2700 on last Friday, but year-to-date it has appreciated 4.74 per cent from 4.4845.
The dollar strengthened this week as economic data from the United States showed increased signs that the Federal Reserve would raise interest rates next month.
On Monday, Malaysian palm oil futures fell to their lowest in a month, due to lower demand as a supply crunch eased and as technical selling weighed on prices.
On Tuesday, Malaysian palm oil futures dipped to their lowest in a month, tracking weaker performing soyoil on the Chicago Board of Trade.
On Wednesday, Malaysian palm oil futures fell for a fourth consecutive session, hitting a more than one-month low on a stronger ringgit and weaker related edible oils.
On Thursday, Malaysian palm oil futures rose, snapping four straight sessions of losses, on the back of a weaker ringgit which hit a one-week low.
On Friday, Malaysian palm oil futures suffered their sharpest decline in four sessions as the market was weighed down by a drop in Chinese soyoil prices.
Technical Analysis
Based on the FCPO daily chart, the market broke the psychological support level of 2,500 and touched the week-low of 2,469 at the middle of the week before it rebounded, the rebound was resisted at 2,540, thereby, it fell below 2,500 on Friday.
On Monday, Malaysian palm oil futures extended losses, the benchmark contract down 38 points to 2,516, the lowest level for more than one month.
On Tuesday, Malaysian palm oil futures fall for the third consecutive days, the benchmark contract down 14 points to close at 2,502.
On Wednesday, Malaysian palm oil futures pared losses after hitting more than a month-low but still ended lower than previous close, with the benchmark month contract down 5 points to close at 2,497.
On Thursday, Malaysian palm oil futures ended its fourth consecutive daily losses, the benchmark contract up 18 points to close at 2,515.
On Friday, Malaysian palm oil futures down after it could not break through its resistance level, the active month contract dropped 19 points to close at 2,496 on Friday.
Next week, the market is likely to move towards to the lower Bollinger Band to retest its previous low at 2,450 if it fails to hold above the next psychological price level of 2,500.
Resistance lines will be positioned at 2,555 and 2,580, whereas support lines will be positioned at 2,450 and 2,415, these levels will be observed next week.
Major fundamental news this coming week
ITS report will be released on June 10.
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.