Technical Analysis for FCPO, FCPO Daily Chart Source: OPF Charting System
Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply higher due to weather concerns in South America and better prospects for exports demand in the coming months.
The benchmark FCPO April contract soared RM112 or 4.58 per cent to settle at RM2,557 per tonne on Thursday from RM2,445 per tonne last Friday. The trading range for the week was from RM2,446 to RM2,593.
Total volume traded for the week amounted to 99,735 contracts, down 47,232 contracts from the previous week.
The open interest as at Wednesday decreased to 169,897 contracts from 185,630 contracts the previous Wednesday.
The soybean prices fell early of the week as some weather forecasts predicted that there would be incoming beneficial rains over the weekend. Thereafter, the weather would turn hot and dry again early next week before rains return in the later part of the week.
However, some market participants remained concerned over the threat and recovery of the crops especially in Argentina. The recent analysts’ reports cut the projection of Argentina’s soybean production due to hot and dry weather but increased the estimates of Brazil’s soybean crops from the previous forecast.
Traders would closely eye on how many inches of rains would fall in South America in the coming week. Any shortcomings of rain could push the soybean prices higher or vice versa.
Malaysia on the other hand was experiencing heavy rains in some parts of the country. Recently, heavy rains occurred in Sarawak and no major disruption or damage to palm oil production so far.
However, the palm oil production would be expected to have a double digit fall in January due to lower yield. Traders were waiting for Reuter’s poll next week to get an indication of the upcoming palm oil’s supply-demand situation in Malaysia.
Meanwhile, exports were picking up at a faster rate during the last half of January, signalling the demand may possibly start kicking in again after the Malaysian government implemented the zero-per cent export tax on crude palm oil since January 1, 2013.
Cargo surveyor ITS released the palm oil export figures for the full month of January on Thursday at 1,458,475 tonnes, a drop of 7.02 per cent while another surveyor SGS at 1,421,865 tonnes, a fall of 6.38 per cent from the same period last month.
There were several vessels carrying palm oil cargo from Indonesia and Malaysia were successfully discharged at several ports in China recently, lifted the market sentiment and reduced concerns over the uncertainty of the new stringent rules on edible oils’ quality by the China’s custom.
Meanwhile, the Indonesian government announced on Monday that its export tax on crude palm oil would be increased from 7.5 per cent to nine per cent for February month also boosted the Malaysian palm oil prices.
The China markets will be expected to slow down next week approaching the Chinese New Year which falls on February 10, 2013.
Technical View
The benchmark April contract had successfully broken few resistances and the bull trend resumed in the medium term.
The earlier target of RM2,745 to RM2,820 for this rally that we set in December will remain intact. Resistance is pegged at RM2,615 and RM2,755 while support is set at RM2,512 and RM2,480.
Major fundamental news this coming week
United States Department of Agriculture (USDA)’s monthly supply-demand report on February 8, 2013.
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my
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