Crude Palm Oil Weekly Report – July 7th, 2018

Malaysia’s palm oil futures erased last week’s gains and fell for the third straight session due to concerns over the US-China trade war, lacklustre export data as well as tracking weakness in related oil.

The benchmark crude palm oil futures (FCPO) contract fell 2.54 per cent to RM2,264 on Thursday, which is RM59 lower than RM2,323 during the previous week on Friday.

The average daily trading volume during Monday to Thursday decreased 21.12 per cent with a total average of 33,933 contracts traded, as compared with a total average of 43,019 contracts traded during last Monday to Thursday.

Daily average open interest during Monday to Thursday decreased 1.42 per cent to 250,869 contracts from 254,493 contracts during last Monday to Thursday.

AmSpec reported that exports of Malaysian palm oil products for June fell 10.3 per cent to 1.073 million tonnes, from 1.197 million tonnes shipped during May.

Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during June fell 11.8 per cent to 1.059 million tonnes from 1.2 million tonnes shipped during May.

US President Donald Trump’s administration has decided to impose tariffs on US$34 billion in Chinese exports to the US which went into effect on Friday.

China said its tariffs on US goods will take effect immediately after Washington’s tariffs on Chinese goods kicks in. Malaysia’s June exports of the edible oil dropped 10.3 per cent from the previous month, independent inspection company AmSpec Agri Malaysia said, while cargo surveyor Societe Generale de Surveillance said exports plunged 11.8 per cent.

Spot ringgit depreciated 0.2 per cent to 4.0465 against the US dollar, compared with 4.0385 on last Friday.

The dollar fell on Friday as US tariffs on Chinese imports took effect, but a muted reaction in currency markets suggested that the escalation had already largely been priced in by investors focusing on a US jobs report due later in the day.

Technical analysis

According to the FCPO daily chart, FCPO reversed last week’s gains and fell to its lowest in a week.

On Monday, FCPO ended at 2,332, nine points higher than the previous close of 2,323, with a traded volume of 10,828.

On Tuesday, FCPO ended at 2,310, 22 points lower than the previous close of 2,332, with a traded volume of 13,149.

On Wednesday, FCPO ended at 2,297, 13 points lower than the previous close of 2,310, with a traded volume of 11,440.

On Thursday, FCPO ended at 2280, 17 points lower than the previous close of 2,297, with a traded volume of 12,702.

On Friday, FCPO ended at 2,264, 16 points lower than the previous close of 2,280, with a traded volume of 12,767.

Based on the daily candlesticks chart, FCPO broke earlier support levels of 2,270 which indicated the FCPO is heading towards to test new support level at 2,238.

The RSI reading of 36 is heading towards 30 which might signal an ‘oversold’ but there is no buying momentum currently as we believe the FCPO might continue to drop during the next trading day.

Hence, traders may initiate short positions and if FCPO successfully breaks 2,238, it may proceeds to second support level of 2,213.

Resistance lines will be positioned at 2,315 and 2,340, whereas support lines will be at 2,238, and 2,213.

These levels will be observed in the coming week.

Major fundamental news this coming week

MPOB, AmSpec, and SGS reports will be released on July 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.

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