The Malaysian palm oil futures snapped three sessions of gains and fell, tracking losses in related oils on the back of the US-China trade friction as it dented market sentiments.
The benchmark crude palm oil futures (FCPO) contract rose 0.55 per cent to RM2,197 on Thursday, which was RM9 lower than RM2,185 recorded during the previous week on Friday.
The average daily trading volume during Monday to Thursday decreased 19.01 per cent with a total average of 43,945 contracts traded, as compared with total average of 54,257 contracts traded during last Monday to Thursday.
Daily average open interest during Monday to Thursday increased 1.58 per cent to 265,779 contracts from 261,588 contracts during last Monday to Thursday. AmSpec reported that exports of Malaysian palm oil products for July rose 3.94 per cent to 1.031 million tonnes, from 1.073 million tonnes shipped during June.
Earlier during the week, a private weather forecaster said that India is likely to receive below-normal monsoon rains in 2018, raising concerns over farm output and economic growth in Asia’s third-biggest economy, where half the farmland lacks irrigation.
However, this was offset by President Donald Trump’s administration which initially announced that it would seek to impose a tariff of 10 per cent on US$200 billion of Chinese imports, and raising the level to 25 per cent. This would escalate the trade dispute between the world’s two biggest economies. Meanwhile, Indonesia on Wednesday evening said it aims to make the use of biodiesel compulsory for all vehicles and heavy machinery from September 1, to cut down on diesel imports and reduce the country’s current account deficit.
Spot ringgit depreciated 0.49 per cent to 4.0825 against the US dollar, compared to 4.0625 on last Friday.
The dollar rose for a fourth straight day on Friday, benefiting from the turbulence caused by the escalating US-China trade conflict, as investors prepared for the US jobs reports.
Technical analysis
According to the FCPO daily chart, FCPO was bearish after erasing the three previous days of gains.
On Monday, FCPO ended at 2,191, six points higher than the previous close of 2,185, with a traded volume of 14,505.
On Tuesday, FCPO ended at 2,195, four points higher than the previous close of 2,191, with a traded volume of 22,248.
On Wednesday, FCPO ended at 2,211, six points higher than the previous close of 2,195, with a traded volume of 20,282.
On Thursday, FCPO ended at 2,193, 18 points lower than the previous close of 2,211, with a traded volume of 21,140.
On Friday, FCPO ended at 2,197, four points higher than the previous close of 2,193, with a traded volume of 15,607.
Based on the daily candlesticks chart, FCPO failed to maintain the rally to break above the 2,220 level and retreated below the 2,200 level.
The FCPO may retest the first support level at 2,185 and it may continue to trade towards the second support level at 2,165 if it successfully breaks the first support level.
Otherwise, it will rebound to first resistance level. Thus, traders who are holding any positions may begin to close positions. Aggressive traders may initiate short positions.
Resistance lines will be positioned at 2,210 and 2,240, whereas support lines will be at 2,185, and 2,165. These levels will be observed in the coming week.
Major fundamental news this coming week
MPOB, AmSpec, and SGS reports will be released on August 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.