The Malaysian palm oil futures (FCPO) declined more than two per cent, making this its fourth consecutive decline.
It was also at its three-year low as weakness in soybean oil and concerns on a slowdown in exports weighed on palm oil prices.
On Friday, FCPO dropped 5.39 per cent to 2,042 as compared with last Friday’s closing price at 2,152, a totaled of 110 points.
The average trading volume went up from 34,866 contracts to 35,590 contracts from the previous week, a total of 2.08 per cent increase despite the three-day trading from Monday, Wednesday and Thursday.
However, there was a 2.2 per cent decreased to 246,661 contracts from 252,090 contracts on the daily average open interest from the previous week.
The latest AmSpec reported weakened export data by 12.91 per cent in October, a total of 1.394 million MT, from 1.6 million MT shipped during September.
Societe Generale de Surveillance (SGS) reported a drop in export by 12.93 per cent export of Malaysian palm oil products during October to 1.427 million tonnes from 1.629 million tonnes shipped during September.
Malaysia’s palm oil experienced a decline, pressured by the new outlook in US’ soybean oil.
The US Department of Agriculture (USDA) raised its forecast on US’ 2018/19 soybean ending stocks to 955 million bushels, nearly 100 million more than the previous forecast of 885 million and above analysts and consensus estimations at 898 million.
The reason for this was because of the plunge in the USDA weekly soybean exports of 388,400 million tonnes, lower than the forecast range between 400,000 to 700,000 million tonnes.
The affected sales were due to the ongoing trade war between China and US. Despite the decline in soybean yields estimation to 178.9 bushels per acre from 180.7 bushels per acre, it could not outweigh the rising ending stocks figure.
Some analysts also worry that there might be a possible further reductions following a rain-slowed harvest.
Palm oil prices are affected by movements of other edible oils as they compete for a share in the global vegetable oil market.
There was also an expectation of lower exports prior to the first 10 days in November. In addition, Malaysian Palm Oil Association (MPOA) also reported an eight per cent growth in October output compared with the previous month.
Ahead of October report from Malaysia Palm Oil Board (MPOB), a poll from Reuters displayed a rise of 5.7 per cent in production to 1.96 million tonnes while the inventories may surge 14.1 per cent to 2.9 million tonnes.
Spot ringgit depreciated 0.4 per cent to 4.1785 against the US dollar, compared with 4.1725 on last Friday.
The dollar rose to a 16-month high on Friday after the US Federal Reserve kept interest rates steady and reaffirmed its monetary tightening stance, cuing up investors for a rate hike in December.
Technical analysis
From the hourly chart, palm oil price continued to decline. RSI located at 24 which indicated palm oil is in the oversold zone and a rebound might be imminent.
However, Malaysia’s palm oil is still bearish. Palm oil is still below EMA 25 and EMA 50, indicating the bear is still in control of the market. There is still no sign of recovery.
In the coming week, FCPO might continue to trade lower.
If FCPO fail to break below the first support level, it may trade towards the first resistance level.
Resistance lines will be positioned at 2,100 and 2,180, whereas support lines will be at 2,020, and 2,000.
These levels will be observed in the coming week.
Major fundamental news this coming week
AmSpec and SGS reports will be released on November 10, 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.