Technical Analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional
Oriental Pacific Futures Malaysian palm oil futures (FCPO) ended higher on Friday as growers’ estimated production in Malaysia would fall steeply due to floods which potentially disrupt harvesting.
For the week, palm oil ended 0.6 per cent higher. The new benchmark FCPO December contract settled at RM2,670 per tonne on Friday which was up by 12 points from last Friday at RM2,654.
The trading range for the week was from RM2,605 to RM2,673. Total volume traded for the week amounted to 157,600 contracts, which was up by 19,993 contracts compared to last Friday’s 137,667 contracts.
The open interest as of Thursday totalled to 153,905 contracts from 151,260 contracts from the previous Thursday, an increase of 2,645 contracts.
Cargo surveyor Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products from November 1 to 30 fell 4.75 per cent to 1,449,664 tonnes from 1,521,928 tonnes shipped during the October 1 to 31 period.
Cargo surveyor Societe Generale de Surveillance (SGS) said on Monday that exports of Malaysian palm oil products for November 1 to 30 fell 4.87 per cent to 1,472,694 tonnes from 1,548,063 tonnes shipped during the October 1 to 31 period.
According to some traders in the Malaysian Palm Oil Association (MPOA), a group of planters forecast that the country’s palm oil output might plunge to approximately 11 per cent in November from a month ago which is far below the market’s expectations of a one per cent fall.
Earlier this week, price fell to as low as RM2,605 as investors took profit due to weak export reports but speculative buying pushed the prices back up, close to a positive level for the week.
A Reuter’s poll on Thursday showed that Malaysian palm oil inventories were likely to climb to 1.98 million tonnes in November, as an expectation of slow production only did little to offset softer winter demand for the tropical oil.
Prices mainly rose by concerns that monsoon floods in the states of Johor, Pahang and Peninsular Malaysia’s eastern coast would complicate palm oil harvesting and cause logistical problems.
Planters typically delay harvesting during heavy rains and thunderstorms, as fruits that have to be immediately transported to mills got stuck on flooded roads which also reduced their quality.
Ringgit weakened throughout the week until the highest at 3.2325 as concerns on the Federal Reserves might start its tapering programme might happen sooner than expected especially with the improvement in the US economy.
Normally, a weaker ringgit will increase demand from foreign buyers as they have to pay lesser to purchase palm oil.
Technical View
From the chart, price managed to stay above the 2,600 level even as it tried to break below the 2,600 level, specifically to 2,602.
However, price managed to bounce to the 2,670 level which we believe that price may retest the 2,692 level in the coming trading days despite trading in a sideway trading range as investors are awaiting for further industry report.
We also draw a strong resistance line (red horizontal line) where should price managed to break and close above it, price may stage another extension of the current bull run.
Failing to do so, price may enter back into the sideway trading range albeit bias to the bullish side.
For the coming week we pegged our important support levels at 2,630, 2,600, 2,565 and 2,506 Meanwhile, for our resistance levels, we pegged important ones at 2,700, 2,755, 2,800
Major fundamental news this coming week
ITS and SGS Export reports – December 10 (Tuesday) MPOB report – December 10 (Tuesday).
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.