Malaysian palm oil futures pared gains before week ended as production declined, tracking weakening ringgit and gains in performance of rival edible oils on the Chicago Board of Trade (CBOT) and China’s Dalian Commodity Exchange.
The benchmark crude palm oil futures (FCPO) contract up 0.66 per cent to 2,455 on Friday, which is RM16 higher than RM2,439 during the previous week.
The average daily trading volume during Wednesday and Thursday fell 7.61 per cent to a total of 83,874 contracts traded, in contrast with 181,562 contracts traded during last Monday to Thursday.
Daily open interest during Wednesday and Thursday increased 2.61 per cent to 437,637 contracts from 853,035 contracts during last Monday to Thursday.
Intertek Testing Services (ITS) reported that export of Malaysian palm oil products during June 1 to 30 fell 8.9 per cent to 1.191 million tonnes, 115,791 tonnes lesser than 1.306 million tonnes shipped during May 1 to 30.
Societe Generale de Surveillance (SGS) reported that export of Malaysian palm oil products during June 1 to 30 fell 7.63 per cent to 1.21 million tonnes,99,961 tonnes lesser than 1.31 million tonnes shipped during May 1 to 30.
Overall, the demand of crude palm oil decreased as the exports to China, India and European Union declined. As both Eid-al-Fitr holidays and Ramadan ended this week, the demand of palm oil usage for cooking dropped. After the festivals, the production is expected to pick up, demand will slow down, and consequently, stocks will build up.
Spot ringgit depreciated 0.13 per cent to 4.2940 against the US dollar this week, compared to 4.2880 on last Friday.The US dollar languished at its lows for the year on Thursday as a drumbeat of hawkish comments from major central banks signaled the era of easy money might be coming to an end for more than just the US.
On Wednesday,Malaysian palm oil futures reversed earlier gains to fall in the second half of trade, on expectations of rising production in the coming months.
On Thursday, Malaysian palm oil futures charted its first rise in three sessions, tracking gains in the performance of rival edible oils on the Chicago Board of Trade (CBOT) and China’s Dalian Commodity Exchange (DCE).
On Friday,Malaysian palm oil futures rose to its highest in nearly two weeks on Friday, in line for a second consecutive session of gains, tracking overnight soyoil on the Chicago Board of Trade (CBOT).
Technical analysis
According to the FCPO daily chart, the market recovered some its losses after it tested 2,440 and failed to break this level. The market headed upwards to test the resistance level at 2,500 after the fall was supported at 2,425.
On Wednesday, Malaysian palm oil futures remained unchanged after the long weekend with the September (active month) contract closed at 2,439.
On Thursday, Malaysian palm oil futures rallied after four days of sideways trading, the benchmark contract closed at 2,464 which was 25 points higher than previous closing.
On Friday, Malaysian palm oil futures pared its early gain, the benchmark contract ended at 2,455 which was nine points lower than the previous closing price.
The Bollinger bands are squeezing which is an indication of falling volatility. The market is heading toward the upper Bollinger band and a breakthrough of it will indicate a strong signal of upward trend and test the psychological level at 2,500.
Resistance lines are positioned at 2,520 and 2,550, whereas support lines will be positioned at 2,415 and 2,380, these levels will be observed in the coming week.
Major fundamental news on the coming week
ITS, SGS and MPOB reports will be released on July 10.