Malaysian palm oil futures continued last week rout, hitting one-month low, as tracking losses in soybean oil prices on the Chicago Board of Trade (CBOT).
The benchmark crude palm oil futures (FCPO) contract fell 1.46 per cent to RM2,697 on Friday, which is RM40 lower than RM2,737 during the previous week.
The average daily trading volume during Monday to Thursday rose 3.1 per cent with a total of 229,593 contracts traded, compared with 167,009 contracts traded during last Monday to Wednesday.
Daily open interest during Monday to Thursday fell 24.8 per cent to 211,991 contracts from 211,391 contracts during last Monday to Wednesday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for September 1 to 25 rose 16.1 per cent to 1.085 million tonnes, from 934,544 tonnes shipped during August 1 to 25.
SocieteGenerale de Surveillance (SGS) reported that export of Malaysian palm oil products during September 1 to 25 rose 26.8 per cent to 1.105 million tonnes from 956,547 tonnes shipped during August 1 to 25.
Palm oil production typically rises in the third and fourth quarters of the year, usually peaking in August or September. However, the output of palm oil in this month could be lower due to some national public holidays.
In addition, palm oil prices fell after the US Environmental Protection Agency said it was seeking comments on a proposal to reduce biodiesel blending requirements into the domestic fuel supply.
Palm oil is affected by movements in crude oil, as the tropical oil is used as feedstock for producing biodiesel, a fuel substitute.
On the other hand, demand for the tropical oil is seen as rising as China and India stocked up this month for mid-Autumn and Deepavali festivities in October, which typically see higher consumption of the tropical oil.
Spot ringgit depreciated 0.58 per cent to 4.2220 against the US dollar, compared to 4.1975on last Thursday.
A weaker ringgit usually makes palm oil cheaper for holders of foreign currencies.
On Monday, Malaysian palm oil futures fell 1.7 per cent to their lowest in more than a month, tracking weakness in soybean oil on the Chicago Board of Trade (CBOT) and as demand from top consumers China and India weakened.
On Tuesday, Malaysian palm oil futures saw its strongest daily gain in three weeks, rebounding from two days of losses, on concerns of weaker output growth.
On Wednesday, Malaysian palm oil futures erased earlier gains to edge lower, tracking overnight losses in soybean oil on the Chicago Board of Trade.
On Thursday, Malaysian palm oil futures traded lower, tracking the weakness in rival edible oilseeds and recording a second straight day of losses. On Friday, Malaysian palm oil futures fell slightly, tracking losses in overnight soybean oil prices on the Chicago Board of Trade (CBOT).
Technical analysis
Based on the FCPO daily chart, the market gapped down and rose sharply before it returned back near to the Monday’s opening. By the end of the week, the current market closed below psychological level at 2,697.
On Monday, Malaysian palm oil futures gapped down and dipped to a four-week low, with the benchmark contract closing at 2,686, which is 51 points lower than the previous closing price.
On Tuesday, Malaysian palm oil futures had a first rejection on downside, with the benchmark contract closing at 2,749, which is 63 points higher than the previous closing price.
On Wednesday, Malaysian palm oil futures erased earlier gains to inch lower, with the benchmark contract closing at 2,747, which is two points lower than the previous closing price.
On Thursday, Malaysian palm oil futures tumbled for second consecutive sessions of losses, with the benchmark contract closing at 2,708, which is 39 points lower than the previous closing price.
On Friday, Malaysian palm oil futures gapped down and traded lower for three consecutive days, with the benchmark contract closing at 2,697, which is 11 points lower than the previous closing price.
The Bollinger bands are expanding which indicate the increase in price volatility.
The market is expected to trade higher if the market trade above this week low at 2,685. Otherwise, it might move toward to the psychological level at 2,600.
Resistance lines will be positioned at 2,770 and 2,800, whereas support lines will be positioned at 2,600 and 2,640. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on September 30.
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.