Malaysian palm oil futures dipped, on track for a fourth consecutive week of decline, as sentiment turned bearish on India’s decision to raise import tax on edible oils to the highest in over a decade, and the strengthening of local palm oil currency.
The benchmark crude palm oil futures (FCPO) contract plunged 3.17 per cent to RM2,626 on Friday, which was RM86 lower than RM2,712 during the previous week.
The average daily trading volume during Monday to Thursday rose 24.75 per cent with a total of 243,879 contracts traded, as compared with 195,489 contracts traded during last Monday to Thursday.
However, daily open interest during Monday to Thursday fell six per cent to 240,643 contracts from 256,018 contracts during last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for November 1 to 20 fell 6.2 per cent to 891,926 tonnes, from 951,339 tonnes shipped during October 1 to 20.
SocieteGenerale de Surveillance (SGS) reported that exports of Malaysian palm oil products during November 1 to 20 fell 8.8 per cent to 882,943 tonnes from 967,707 tonnes shipped during October 1 to 20.
Indian oilseed crushers had been struggling to compete with cheaper imports from Indonesia, Malaysia, Brazil and Argentina, reducing demand for local rapeseed and soybeans which have been trading below government-set prices in the physical market and angering farmers.
India lifted the import tax on crude palm oil to 30 per cent from 15 per cent and increased import tax duty on refined palm oil imports to 40 per cent from 25 per cent.
Spot ringgit appreciated 1.13 per cent to 4.1168 against the US dollar this week, compared with 4.1640 last Friday.
The ringgit has risen to 13-month highs following positive domestic economic growth data. The dollar skidded on Wednesday after minutes from the Fed’s latest policy meeting showed some policymakers fretting over the stubbornly weak inflation.
Technical analysis
According to the FCPO daily chart, the market gapped down and traded lower to touch the three-month low at 2,586 before rebounding to trade above 2,600.
On Monday, Malaysian palm oil gapped-down and tumbled to a three-month low, with the benchmark contract closing at 2,630.
On Tuesday, Malaysian palm oil rebounded after hitting the three-month low, with the benchmark contract closing at 2,635.
On Wednesday, Malaysian palm oil erased its earlier losses and settled higher, with the benchmark contract closing at 2,644.
On Thursday, Malaysian palm oil settled at a four-month low, with the benchmark contract closing at 2,608.
On Friday, Malaysian palm oil pared earlier losses during the second-half session, with the benchmark contract closing at 2,799.
In the coming week, the market is expected to resume its bearish trend to test the psychological level 2,600 as daily candlesticks were trading on the Lower Bollinger Band.
The upward momentum was depleting which can be seen from the decline of volume on Friday rebound.
Resistance lines will be positioned at 2,710 and 2,795, whereas support lines will be positioned at 2,540 and 2,500. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on November 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.