Malaysian palm oil futures dipped to a one-week low due to technical correction, tracking weaker performance from related edible oils on Chicago Board of Trade and Dalian Commodity Exchange.
The benchmark crude palm oil futures (FCPO) contract slid 4.3 per cent to RM2,737 on Thursday, which is RM123 lower than RM2,860 recorded during the previous week.
The average daily trading volume during Monday to Wednesday dropped 8.63 per cent with a total of 167,009 contracts traded, compared with 243,705 contracts traded during last Monday to Thursday.
Daily open interest during Monday to Wednesday fell 1.7 per cent to 211,391 contracts from 215,044 contracts during last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for September 1 to 20 increased 25.4 per cent to 852,206 tonnes, from 679,539 tonnes shipped during August 1 to 20.
Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during September 1 to 20 increased 26.8 per cent to 878,422 tonnes from 692,662 tonnes shipped during August 1 to 20.
The market was underpinned by strong export data from cargo surveyors, but the gains are likely to be short-lived due to expectations of stronger exports which are already priced in.
Palm oil exports from Malaysia surged over 20 per cent in the first half of September from a month ago, led by strong demand from China, Europe and India.
Demand for the tropical oil is seen as rising for the full month of September, as China and India stock up ahead of the Mid-Autumn festival and the upcoming Diwali festival, which lead to higher usage of vegetable oils.
Spot ringgit depreciated 0.23 per cent to 4.1975 against the US dollar, compared to 4.1880 on last Friday.
The focus for this week is the Fed’s September 19 to 20 policy meeting. The Fed will likely announce a plan to start shrinking its balance sheet at the meeting, but it is widely expected to keep interest rates unchanged.
On Monday, Malaysian palm oil futures had its sharpest daily fall in a month, marking its third straight session of losses. It tracked weakness in related edible oils and as a stronger ringgit weighed on the market.
On Tuesday, Malaysian palm oil futures fell to its lowest in a week, a fourth straight session of decline, due to a technical correction and traders’ expectations that export demand will cool down towards the end of the month.
On Wednesday, Malaysian palm oil futures rose for the first time in five sessions, supported by rising export demand and strengtheninig soyoil on the Chicago Board of Trade (CBOT).
On Thursday, Malaysian palm oil futures dipped during the late trade, hitting a one-week low, pressured by rival oils on the CBOT and Dalian Commodity Exchange.
Technical analysis
Based on the FCPO daily chart, the market dipped and broke through the psychological support level of 2,800, touching the week-low of 2,736.
On Monday, Malaysian palm oil futures traded lower for three consecutive days, with the benchmark contract closing at 2,804, which is 56 points lower than the previous closing price.
On Tuesday, Malaysian palm oil futures plunged to a one-week low, with the benchmark contract closing at 2,770, which is 34 points lower than the previous closing price.
On Wednesday, Malaysian palm oil futures inched up during late trade, with the benchmark contract closing at 2,769, which is one point higher than the previous closing price.
On Thursday, Malaysian palm oil futures tumbled to a one-week low, with the benchmark contract closing at 2,737, which is 32 points lower than the previous closing price.
The Bollinger bands are narrowing which could indicate a decline in price volatility. The market is expected to trade higher after touching Middle Bollinger Band.
In the coming week, bands breaking could play a significant role, as an upper band break could signal a new advance.
Resistance lines will be positioned at 2,850 and 2,800, whereas support lines will be positioned at 2,660 and 2,700. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on September 25.
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.