Malaysian palm oil futures ended the week trading to the highest in more than five weeks, attributed to gains in related edible oils and crude oil while underpinned by a weaker ringgit despite setbacks from weaker export data.
The benchmark crude palm oil futures (FCPO) contract rose 4.78 per cent to RM2,449 on Friday, which is RM58 lower than RM2,332 during the previous week.
The average daily trading volume during Monday, Wednesday and Thursday increased 23.72 per cent with a total average of 50,861 contracts traded, as compared with a total average of 38,797 contracts traded during last Monday to Thursday.
Daily average open interest during Monday, Wednesday and Thursday increased 1.97 per cent to 237,751 contracts from 233,066 contracts during last Monday to Thursday.
AmSpec reported that exports of Malaysian palm oil products for May 1 to 15 fell 14.9 per cent to 539,084 tonnes, from 633,530 tonnes shipped during April 1 to 15.
Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during May 1 to 15 fell 13.7 per cent to 550,961 tonnes from 638,293 tonnes shipped during April 1 to 15.
Overall, Malaysia exports data from SGS and Amspec tracked slow export demand.
Palm oil shipments from Malaysia, the world’s second largest exporter, fell 13.7 to 14.9 per cent in the first half of May versus the corresponding period in April, data from inspection company AmSpec Agri Malaysia and cargo surveyor Societe Generale de Surveillance showed.
Aside from that, the slowdown of demand could also be attributed to Malaysia’s resumption of a crude palm oil export tax, which was set at a five per cent in May following four previous months of suspension.
The ringgit fell 0.1 per cent on Thursday evening to 3.967 per dollar. It lost 0.5 per cent since the start of the week.
Spot ringgit depreciated 1.07 per cent to 3.977 against the US dollar, compared with 3.9345 on last Friday. The dollar edged higher against the yen on Friday and set a fresh four-month high, buoyed by a further rise in US Treasury yields that suggests a more upbeat outlook for the world’s largest economy and possibly more rate hikes.
Technical analysis
According to the FCPO daily chart, FCPO recovered from losses from the previous week and traded higher, the highest in more than five weeks. Notable gains were seen on Friday.
On Monday, FCPO ended at 2,416, 37 points higher than the previous close of 2,379, with a traded volume of 25,852.
On Tuesday, FCPO ended at 2,437, 21 points higher than the previous close of 2,416, with a traded volume of 18,969. On Wednesday, FCPO ended at 2,415, 22 points lower than the previous close of 2,437, with a traded volume of 12,934.
On Thursday, FCPO ended at 2432, 17 points higher than the previous close of 2,415, with a traded volume of 17,793.
On Friday, FCPO ended at 2449, 17 points higher than the previous close of 2,432, with a traded volume of 13,946.
Based on the daily candlesticks chart, we believe FCPO might rebound as there might be an upward crossover between EMA 25 and EMA 50 in following week. RSI index might retest 60 points and if FCPO successfully breaks above 60 points, this will further confirm the upward trend. Therefore, aggressive traders may initiate long position while conservative traders may hold off and observe the coming week’s market direction for further confirmation.
Resistance lines will be positioned at 2,362 and 2,498, whereas support lines will be at 2,447, and 2,399. These levels will be observed in the week ahead.
Major fundamental news this coming week
AmSpec, and SGS reports will be released on May 20.
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.