Malaysian palm oil futures rallied to a seven-week high and ended their winning streaks due to price pressure from US soybean oil and import tax raised from India.
The benchmark crude palm oil futures (FCPO) contract rose 0.5 per cent to RM2,469 on Friday, which is RM13 higher than RM2,456 recorded during the previous week.
The average daily trading volume during Monday to Thursday fell 3.76 per cent with a total average of 38,861 contracts traded, as compared with total average of 40,380 contracts traded during last Monday to Thursday.
Daily average open interest during Monday to Thursday increased 25 per cent to 225,706 contracts from 238,597 contracts during last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for February 1 to 25 rose five per cent to 1.065 million tonnes, from 1.014 million tonnes shipped during January 1 to 25. (There was no ITS data available for full month of February)
Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during February fell 11 per cent to 1.168 million tonnes from 1.313 million tonnes shipped during January.
Malaysian palm oil shipments have also been on an uptrend in February compared to the previous month. Exports were up five per cent during the February 1 to 25 period versus the corresponding period in January, according to data from cargo surveyor Intertek Testing Services on Monday.
The Chicago Board of Trade’s May soybean oil contract edged down 0.1 per cent while May soybean oil on China’s Dalian Commodity Exchange rose by 0.4 per cent.
The movement in US soybean oil affected palm oil prices. India, the world’s biggest edible oil importer, raised its import tax on crude palm oil to 44 per cent from 30 per cent and lifted the tax on refined palm oil to 54 per cent from 40 per cent, in a bid to support local farmers.
Spot ringgit depreciated 0.27 per cent to 3.9160 against the US dollar, compared to 3.9055 on last Thursday.
The dollar index is down 2.1 per cent this year, dogged by suspicions that the Trump administration prefers a weaker dollar to help narrow the United States’ yawning trade deficit. Worries that Trump’s big tax cuts and spending plans will ramp up fiscal deficits to the extent that they undermine confidence in US debt have also hurt the greenback.
Technical analysis
According to the FCPO daily chart, the market extended its gain to reach a seven-week high, and slipped from its winning streaks on Friday.
On Monday, FCPO ended at 2,540, 16 points higher than the previous close of 2,524, with traded volume of 19,910. On Tuesday, FCPO ended at 2,542, two points higher than the previous close of 2,540, with a traded volume of 17,622. On Wednesday, FCPO ended at 2,558, 16 points higher than the previous close of 2,542, with a traded volume of 20,972.
On Thursday, FCPO ended at 2,548, 10 points lower than the previous close of 2,558, with a traded volume of 17,738.
On Friday, FCPO ended at 2,469, 79 points lower than the previous close of 2,548, with a traded volume of 36,482.
Based on the daily candlesticks chart, despite the market reaching its seven-week high, the selling momentum increased on Friday. It offset earlier gains and drove the price lower and broke second resistance points.
The selling momentum will carry on further until the following week. In the coming week, traders may initiate short positions and trade lower until the second support lines.
Resistance lines will be positioned at 2,475 and 2,538, whereas support lines will be at 2,445, and 2,433. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on March 5 while MPOB’s report will be released on March 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.