The Malaysian palm oil futures were down due to stronger ringgit and bearish data for August from Malaysian Palm Oil Board (MPOB), despite gains earlier due to support from a strong demand outlook.
The benchmark crude palm oil futures (FCPO) contract fell 1.85 per cent to RM2,222 on Thursday, which was RM42 higher than RM2,264 during the previous week on Friday.
The average daily trading volume during Wednesday to Thursday decreased 8.04 per cent with a total average of 30,043 contracts traded, as compared with a total average of 32,669 contracts traded during last Monday to Thursday.
Daily average open interest during Wednesday to Thursday decreased 2.79 per cent to 254,061 contracts from 261,351 contracts during last Monday to Thursday.
AmSpec reported that exports of Malaysian palm oil products for September 1 to 10 rose 69.52 per cent to 506,212 MT, from 298,610 MT shipped during August 1 to 10.
Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during September 1 to 10 rose 44.44 per cent to 415,275 tonnes from 287,501 tonnes shipped during August 1 to 10.
Palm oil stockpiles in August rose 12.4 per cent from a month earlier to 2.49 million tonnes, while production gained 7.9 per cent to 1.62 million tonnes, data released by the industry regulator during the midday break showed.
Exports fell 8.1 per cent to 1.1 million tonnes, weaker than market expectations. However, exports are also likely to be supported by the zero per cent crude palm oil tax rate for September, down from 4.5 per cent last month.
Improving demand could support the market, said another futures trader, adding that Malaysian palm oil shipments might see a double-digit rise in September, driven by the oncoming festive demand.
Spot ringgit appreciated 0.05 per cent to 4.1415 against the US dollar, compared with 4.1435 on last Friday.
The dollar dipped on Friday after weaker-than-expected US inflation data, with the currency already sagging on signs of reduced trade tensions between the US and China.
According to the FCPO daily chart, FCPO broke EMA 50 and continued to trade downwards as buyers failed to outperform the sellers.
On Wednesday, FCPO ended at 2,239, 25 points lower than the previous close of 2,264, with a traded volume of 18,475
On Thursday, FCPO ended at 2,243, four points higher than the previous close of 2,239, with a traded volume of 11,351.
On Friday, FCPO ended at 2,222, one point lower than the previous close of 2,275, with a traded volume of 13,397.
Based on the daily candlesticks chart, FCPO failed to stayed above EMA 50 and broke EMA 25, as indicated by the bear that has arrived. There was a strong resistance around 2,257.129, despite FCPO being able to break out on September 4.
The sellers, however, dominated the trading and drove the price lower.
RSI of 57 further solidified the strong resistance level at 2,257.129 as there are several rejections at this level. In the coming week, FCPO might retest the first support level and if it successfully break below this level, it might advance to a second support level.
Thus, traders who are holding short positions might hold current positions while traders with no positions might wait for better entry point.
Resistance lines will be positioned at 2,235 and 2,250, whereas support lines will be at 2,220, and 2,210.
These levels will be observed in the coming week.
Major fundamental news this coming week
AmSpec and SGS reports will be released on September 15.
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.