Borneo Post FCPO Chart 27th October.
The Malaysian palm oil futures (FCPO) was on a losing streaks for four-straight sessions, a two months low, due to weaknesses in related oils and negative drivers from Italy, Saudi Arabia as well as trade war between US and China weighed on prices.
On Friday, FCPO fell 3.49 per cent to 2,147 as compared with last Friday’s closing price at 2,222, a total of 75 points.
Average trading volume declined from 47,794 contracts to 26,726 contracts from the previous week, a total decline of 44.08 per cent.
There was also a 1.71 per cent decrease to 256,368 contracts from 260,834 contracts in the daily average open interest from the previous week as compared with trading days from Monday to Thursday.
The latest AmSpec report showed weakened export data by 17.32 per cent during October 1 to 25, a total of 1.097 million MT, from 1.326 million MT shipped during September 1 to 25.
Societe Generale de Surveillance (SGS) reported a 20.19 per cent decline in exports of Malaysian palm oil products during October 1 to 25 to 1.085 million tonnes from 1.36 million tonnes shipped during September 1 to 25.
The monthly data from Malaysia Palm Oil Board (MPOB) showed that September’s inventories rose to an eight-month high as production exceeded exports.
It reported a 14.4 per cent jump from August to its strongest in 10 months at 1.85 million tonnes, the highest September level since 2015.
The market expected October’s productions to increase, in tandem with forecast towards the increase in production in the last quarter of the year before the production starts to diminish.
This expectations added worries for traders and investors as rising production tend to weigh on palm oil’s price.
A triple digit drop on Tuesday and Wednesday in US stocks also sparked fear in the market and reduced risk appetite.
With Dow Jones dropping more than 500 points, S&P futures tumbled more than 60 points and Nasdaq 100 futures declined nearly 200 points.
Furthermore, Europe’s region major bourses were also lower, a 22-month low.
The major sell-off echoed Asian shares markets and affected commodities market as well, especially in US soybean oil and other related oils as palm oil prices are affected by movements of other oils as they compete for a share in the global vegetable oils market.
The slide in crude oils also weighed on the palm oil sector.
US Energy Information Administration (EIA) reported an increase of 9.9 million barrels in crude supplies.
The palm oil industry was also weighed by selling pressure from global stocks market. Saudi Arabia also said it might supply more crude oils at a faster rate, if needed, and this added more pressure towards the drop in oil prices.
Spot ringgit depreciated 0.52 per cent to 4.1560 against the US dollar, compared with 4.1775 on Friday.
The dollar was down slightly and near a 10-week high as investors wait for the release of the quarterly economic data.
Technical analysis
Despite the slight rally on Monday, closing at 2,237, the FCPO started to decline and broke the immediate support at 2,170. Since then, it continued to drop from Tuesday until Friday.
The bear has the upper hand as RSI showed that FCPO is in a bearish zone at 22. FCPO still remained below the death-cross between EMA 25 and 50, further indicating that the bear is in control of the price.
Overall, FCPO is still bearish and immediate support is set at 2,130.
In the coming week, FCPO might continue to trade downwards.
If the FCPO fails to break below the first support level, it may trade towards the first resistance level.
Resistance lines will be positioned at 2,250 and 2,275, whereas support lines will be at 2,130, and 2,110.
These levels will be observed in the coming week.
Major fundamental news this coming week
AmSpec and SGS reports will be released on October 31, 2018 (Wednesday).
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.