Borneo Post FCPO Chart 20th October.
The Malaysia palm oil futures (FCPO) failed to erase losses on Friday, in line for a second day losses, weighed down by weaker related oils in China’s Dalian Commodity Exchange and Chicago Board of Trade.
On Friday, FCPO fell 1.35 per cent to 2,222 as compared with last Friday’s closing price at 2,252, a totaled of 30 points.
Average trading volume rose from 39,650 contracts to 47,794 contracts from the previous week, a total of 20.54 per cent gains.
However, there was a 1.41 per cent decrease to 260,834 contracts from 264,514 contracts in the daily average open interest from the previous week as compared with trading days from Monday to Thursday.
The latest AmSpec showed export data by 27.51 per cent during October 1 to 15, a total of 538,607 MT, from 742,997 MT shipped during September 1 to 15. Societe Generale de Surveillance (SGS) reported that Malaysian palm oil exports declined 28.95 per cent during October 1 to 15 to 552,076 tonnes from 777,049 tonnes shipped during September 1 to 15.
The US Department of Agriculture (USDA) reported disappointing export sales for US soybeans, below a range of trade expectations export sales at 293,600 and 101,400 million tonnes for soybeans and soybean meals respectively.
The improved harvest weather also weighed down the price of US soybean oil.
China’s weak import sales will likely drop by a quarter in the remaining months, its biggest fall in at least 12 years, as buyers lower their purchases amid the US-China trade war as well as high domestic stockpiles.
China, which is the biggest importer of US soybeans, anticipated a drop of around 18 to 20 million tonnes in the last quarter, compared with 24.1 million tonnes in the same period last year.
Normally, a drop in either China or US soybean oil will affect the local palm oil prices as they compete for a share in global vegetable oils market.
From technical perspective, UD soybean oil retested the key resistance level on October 4, 2018 at 30 but failed to break the level and retraced near support level at the 60-days moving average.
It gained back momentum on Friday to challenge the key resistance level again on Tuesday and Wednesday.
But it failed to break through the psychological level at 30 and traded near the support 60-days moving average. If the market continue to break through the support level, it will continue to trade lower.
This will affect market movement in Malaysia’s palm oil market as palm oil prices are positive correlated with other edible oils such as US soybean oil or China’s edible oils as they compete for a share in global vegetable oils market.
Spot ringgit depreciated 0.1 per cent to 4.16 against the US dollar, compared with 4.156 on Friday.
The US dollar rose to a one-week high against the euro on Thursday after the European Commission said Italy’s 2019 budget draft is in serious breach of EU budget rules.
Technical analysis
Despite the rally from 2,241 on Tuesday to 2,260 on Thursday, FCPO ended with an unconfirmed inverted hammer, signaling tug-of-war between sellers and buyers.
However, the inverted hammer was accompanied with high trading volume of 3,461, further reinforced by a sign of imminent reversal.
Without exception, it declined 16 points the following day.
Additionally, a death-cross happened on Thursday for both EMA25 and EMA50 as both continued to surge downwards, signifying a negative bias.
The same goes to the EMA10 which is below both EMA25 and EMA50. Overall, the market remains bearish and there is little sign of recovery yet.
The immediate support level is set at 2,214.
In the coming week, FCPO might continue to trade upwards, if the FCPO fails to break above the first resistance level. It may trade towards the first support level.
Resistance lines will be positioned at 2,250 and 2,275, whereas support lines will be at 2,214, and 2,200. These levels will be observed in the upcoming week.
Major fundamental news this coming week
AmSpec and SGS reports will be released on October 20, 2018 (Saturday).
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.