Malaysian palm oil futures continued to trade down further, due to the strengthening ringgit, the tropical oil currency and concern from European Union (EU) on banning the use of palm oil in biofuels.
The benchmark crude palm oil futures (FCPO) contract fell 2.79 per cent to RM2,474 on Friday, which is RM45 lower than RM2,545 during the previous week.
The average daily trading volume during Monday to Thursday fell 0.19 per cent with a total of 203,257 contracts traded, as compared with 203,643 contracts traded during last Monday to Thursday.
Daily open interest during Monday to Thursday dropped 4.65 per cent to 228,064 contracts from 239,187 contracts during last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for January 1 to 15 fell 7.4 per cent to 552,635 tonnes, from 596,862 tonnes shipped during December 1 to 15.
SocieteGenerale de Surveillance (SGS) reported that exports of Malaysian palm oil products during January 1 to 15 fell 2.8 per cent to 564,968 tonnes from 581,254 tonnes shipped during December 1 to 15.
A large portion of Europe’s palm oil imports are used to make biofuels, but the European Parliament backed a call last April for greater vetting of palm and other vegetable oils used in biofuels in an effort to prevent the EU’s post-2020 renewable transport targets from leading to deforestation.
Palm oil inventories in Malaysia rose to a more than two-year high of 2.7 million tonnes at end-December, up seven per cent on the month, as demand remained weak. India last year, raised import taxes on edible oils to the highest in a decade and traders were worried there could be another hike coming.
Spot ringgit appreciated 0.86 per cent to 3.9365 against the US dollar this week, compared to 3.9705 on last Friday.
The US currency slipped to its lowest since December 2014, with investors selling on the view that other central banks will join the Federal Reserve in looking to raise ultra-low interest rates adopted to combat the 2008 global financial crisis and subsequent recessions.
Technical analysis
According to the FCPO daily chart, the market fell to a three-week low and continue to decline further to week low of 2,441.
On Monday, FCPO active month contract gained 10 points to close at 2,555, with lower traded volume than that of Friday’s session.
On Tuesday, FCPO ended 40 points lower from the previous close at 2,515, with a traded volume of 24,198.
On Wednesday, FCPO ended 30 points lower from the previous close at 2,485, with a traded volume of 25,084.
On Thursday, Malaysian palm oil futures traded lower, with the benchmark contract closing at 2,583, 24 points lower than the previous closing price.
On Friday, FCPO ended 35 points lower from the previous close of 2,474, with a traded volume of 19,669.
Based on the daily candlesticks chart, market trend broke Middle Bollinger Band and continue to head downwards and might cross below the Lower Bollinger Band.
This coming week, the market is seen to continue to trade lower if the daily candlestick successfully breach the first support level.
Resistance lines will be positioned at 2,516 and 2,569, whereas support lines will be positioned at 2,417 and 2,362.
These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on January 20.
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.