Malaysia’s palm oil futures (FCPO) jumped higher on Friday, rebounding from two sessions of losses, mainly due to gains in soy oil on Friday which staged a rebound.
Massive loss in US stocks and commodities market as well as weak export data and rising September stockpiles were the main causes of sharp declines from previous two sessions.
On Friday, FCPO was down 1.3 per cent to 2,194 as compared with last Friday’s closing price at 2,223, a decline of 29 points.
The average trading volume ranged from 36,704 to 39,650 contracts from last Monday to Thursday, a 8.03 per cent surge.
However, there was a 3.95 per cent increase to 264,514 contracts from 254,061 contracts in the daily average open interest from the previous week as compared with the trading days from Monday to Thursday.
Latest AmSpec reported a decline of 39.08 per cent in exports for October 1 to 10, a total of 308,380 MT, from 506,212 MT shipped during September 1 to 10.
Societe Generale de Surveillance (SGS) also reported a drop of 15.31 per cent in exports of Malaysian palm oil products during October 1 to 10 to 351,669 tonnes from 415,275 tonnes shipped during September 1 to 10.
With the exports data released on Wednesday, FCPO fell to a one-week low on Wednesday, as market sentiments were hammered by data which showed weak October exports, rising September stockpiles.
Malaysia Palm Oil Board (MPOB) report data in September showed a rise of 1.45 per cent in stockpiles to 2.54 million tonnes as compared with August’s end stocks of 2.5 million tonnes, as well as weak exports data from Amspec and SGS.
However, the losses did not stop as the FCPO to continue experiencing losses near one per cent lower on Thursday, after touching its lowest level in more than a week, due to the selloff on Wall Street.
With three main indexes consisting of Dow Jones (down 3.2 per cent), S&P 500 (down 3.3 per cent) and NASDAQ (down 4.1 per cent) posted their steepest single day selloff since February 2018. Since then, fear spread around the global equities market and all major bourses witnessed major drops.
Crude oil also joined the selloff, with its biggest two-day drop since July, with West Texas Intermediate (WTI) declining 1.8 per cent to US$71.81 and Brent crude oil was down about two per cent to US$81.41.
The weekly Environmental Impact Assessment (EIA) on Thursday reported a 2.6 million barrel increase, twice more than expected, taking a hit on crude oil.
Despite the market rout on Wall Street which continued til Friday, the FCPO managed to rebound on Friday as it tracked the gains in soy oil on the US Chicago Board of Trade (CBOT).
Crude oil was also underpinned FCPO, with support from robust Chinese crude imports. Both Brent crude oil and US West Texas Intermediate (WTI) rose 1.1 per cent at US$81.15 per barrel and US$71.72 per barrel respectively.
Spot ringgit depreciated 0.25 per cent to 4.1560 against the US dollar, compared with 4.1455 on last Friday.
The dollar crept up on Friday, reflecting investors’ confidence in the US economy, despite criticism by President Donald Trump of the Federal Reserve and a sell-off in Us equities.
FCPO broke below EMA 10 on Monday, with a long engulfing candlestick which closed at 2,185, showing a strong selling momentum is imminent.
A strong rebound might occur soon and the next candle on Friday confirmed the rebound signal, setting the stage for a rebound. However, FCPO is still in a downward trend as lower-high and lower-low was formed from previous sessions. There is also strong resistance at RSI 60 and FCPO might retest that level soon.
Currently, the market showed that FCPO may retest the barrier set at 2,200 and 2,235. During the week ahead, FCPO might continue to trade upwards.
A resistance level of 2,200 is set and if FCPO fails to break above the first resistance level, it may trade towards the first support level at 2,160.
Resistance lines will be positioned at 2,200 and 2,235, whereas support lines will be at 2,160, and 2,140. These levels will be observed in the week ahead.
Major fundamental news this coming week
AmSpec and SGS reports will be released on October 15, 2018 (Monday).
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.