Malaysian palm oil futures edged down this week due to ringgit strengthen further and elevated inventory levels after a dry weather El Nino phenomenon as well higher expectation of production.
The benchmark crude palm oil futures (FCPO) contract fell 0.04 per cent to RM2,425 on Friday, which was RM8 higher than RM2,426 during the previous week.
The average daily trading volume during Monday to Thursday decreased 39.99 per cent with a total average of 34,790 contracts traded, as compared with a total average of 57,970 contracts traded during last Monday to Thursday.
Daily average open interest during Monday to Thursday increased 2.86 per cent to 229,020 contracts from 222,460 contracts during last Monday to Thursday.
AmSpec reported that exports of Malaysian palm oil products for March 1 to 25 rose 9.5 per cent to 1.166 million tonnes, from 1.065 million tonnes shipped during February 1 to 25.
Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during March 1 to 25 rose 10.6 per cent to 1.19 million tonnes from 1.077 million tonnes shipped during February 1 to 25.
Malaysia’s full-year output is seen rising to 20.5 million tonnes in 2018, its highest level on record, as crops shake off the lingering effects of a dry weather El Nino phenomenon and as young trees come to maturity and increase harvested areas.
Expectations of rising production for the full month of March could also weigh on sentiment.
Palm oil output typically sees seasonal gains around the second quarter of the year before peaking in the third quarter.
The Malaysian currency rose as much as 0.53 per cent against the dollar to 3.8550, highest since April 2016, bolstered by high oil prices and portfolio inflows.
It was last up 0.35 per cent at 3.8620 per dollar on Wednesday evening for a third consecutive sessions of gains but was down 0.1 per cent at 3.8660 per dollar on Thursday evening, after rising to its highest in nearly two years in the previous session.
Spot ringgit appreciated 1.3 per cent to 3.8620 against the US dollar, compared to 3.9130 on last Friday. The dollar stalled against its peers on Friday as the recovery seen earlier petered out ahead of the new quarter, which could potentially bring renewed pressure on the greenback.
Technical analysis
According to the FCPO daily chart, FCPO went on a three-straight session of declines, but ended the losing spree on Friday due to technical buying.
On Monday, FCPO ended at 2,434, eight points higher than the previous close of 2,426, with a traded volume of 14,127.
On Tuesday, FCPO ended at 2,431, three points lower than the previous close of 2,434, with a traded volume of 19,955.
On Wednesday, FCPO ended at 2,417, 14 points lower than the previous close of 2,431, with a traded volume of 13,604.
On Thursday, FCPO ended at 2,404, 13 points lower than the previous close of 2,417, with a traded volume of 17,516.
On Friday, FCPO ended at 2,425, 21 points higher than the previous close of 2,404, with a traded volume of 9,031.
Based on the daily candlesticks chart, technical indicators showed that FCPO headed sideways as signaled by Bollinger Band which showed the unclear market direction.
Nevertheless, with the previous resistance broken at 2,407, it rebounded and might test the new resistance at 2,436.
In the week ahead, FCPO is expected to trade higher to the first resistance at 2436, premised on the large gap-up occurred on Friday.
Aggressive traders may place new long positions around first resistance points at 2436 while conservative traders may wait and only enter the market after new confirmation signal appear.
Resistance lines will be positioned at 2,436 and 2,445, whereas support lines will be at 2,407, and 2,399. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on March 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.