Crude Palm Oil Weekly Report – 23rd June 2018

The Malaysian palm oil futures recorded losses despite rebounded on Friday, hitting a two-year low, due to concerns about a trade war between China and US as well as weaker exports demand and related oil.

The benchmark crude palm oil futures (FCPO) contract fell 2.31 per cent to RM2,282 on Thursday, which is RM54 lower than RM2,336 during the previous week on Friday.

The average daily trading volume during Monday to Thursday increased 30.08 per cent with a total average of 67,146 contracts traded, as compared with total average of 46,950 contracts traded during last Monday to Thursday.

Daily average open interest during Monday to Thursday increased 0.66 per cent to 252,566 contracts from 250,908 contracts during last Monday to Thursday.

AmSpec reported that exports of Malaysian palm oil products for June 1 to 20 fell 6.4 per cent to 690,015 tonnes, from 736,942 tonnes shipped during May 1 to 20.

Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during June 1 to 20 fell 10 per cent to 670,442 tonnes from 745,309 tonnes shipped during May 1 to 20.

Prices of commodities in China tumbled as investors’ sentiment was shaken by an intensifying trade war between Beijing and Washington. Oil prices fell after China threatened duties on American crude imports and ahead of the OPEC meeting, but US Brent crude recovered its losses to gain later in the day. Another palm oil trader added that weaker exports and forecasts of higher production in Malaysia were additional factors weighing on the market

Spot ringgit depreciated 0.54 per cent to 4.0135 against the US dollar, compared with 3.992 last Friday. The dollar pulled back from an 11-month peak against a basket of major currencies on Friday as investors took profits after the currency’s earlier rally, while sterling rebounded from a seven-month low after a slightly hawkish tilt from the Bank of England surprised the market.

Technical analysis

According to the FCPO daily chart, FCPO continued its losing streak from last weeks’ losses but rebounded on Friday.

On Monday, FCPO ended at 2,308, 28 points lower than the previous close of 2,336, with a traded volume of 19,515.

On Tuesday, FCPO ended at 2,262, 46 points lower than the previous close of 2,308, with a traded volume of 28,405. On Wednesday, FCPO ended at 2,260, two points lower than the previous close of 2,262, with a traded volume of 20,795.

On Thursday, FCPO ended at 2,249, 11 points lower than the previous close of 2,260, with a traded volume of 23,655.

On Friday, FCPO ended at 2,282, 33 points higher than the previous close of 2,249, with a traded volume of 15,521.

Based on the daily candlesticks chart, FCPO managed to rebound after breaking the first support level at 2275. However, the market is still in a bearish sentiment as EMA 25 is still below EMA 50. However, RSI rebounded from the previous slump.

We shall wait patiently for the coming week’s market activity for stronger uptrend confirmation. In the week ahead, FCPO may retest the first resistance level.

Thus, aggressive traders may initiate small amount of long positions while conservative traders may hold on until stronger bullish confirmation signal to appears.

Resistance lines will be positioned at 2,300 and 2,325, whereas support lines will be at 2,275, and 2,240. These levels will be observed in the coming week.

Major fundamental news this coming week

AmSpec and SGS reports will be released on June 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.

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