Borneo Post FCPO Chart 24th November.
The Malaysia palm oil futures (FCPO) failed to maintain rally from the previous three consecutive sessions due to concerns toward rising inventories in the following months capped gains.
On Friday, FCPO surged 3.54 per cent to 2,045 as compared to last Friday’s closing price at 1,975, a totaled of 67 points.
Average trading volume went up from 48,378 contracts to 56,476 contracts from the previous week, a total of 16.74 per cent increase despite only three trading days on Monday, Wednesday and Thursday. However, there was a 0.89 per cent decrease to 246,699 contracts from 248,898 contracts on the daily average open interest as compared with the previous week.
The latest AmSpec showed a decrease of 10.91 per cent in palm oil product exports from November 1 to 20, a total of 793,497 MT, from 890,622 MT shipped during October 1 to 20. Societe Generale de Surveillance (SGS) reported a surge of one per cent in exports of Malaysian palm oil products during November 1 to 15 to 557,781 tonnes from 522,076 tonnes shipped during October 1 to 15. The latest SGS data for October 1 to 20 will be released on November 27.
On Wednesday, the crude oil rebounded to about US$1, recovering from the previous seven per cent slide which was caused by President Donald Trump’s statement about his administration not taking strong action against Saudi Arabia for the murder of journalist Jamal Khashoggi. Despite the gains, EIA’s data showed that crude oil inventories increased by 4.85 million barrels in the week to November 16, as compared with forecasts of 2.5 million barrels after 10.27 million barrels in the previous week. This indicated that the rising inventories may be capped over gains. Overall, the outlook for crude oil remain uncertain due to the difficult economic environment. Thus, investors and traders stay on the sidelines.
Palm oil prices are influenced by movements in crude oil, as the edible oil is used as feedstock to make biodiesel.
The markets are looking forward to the highly anticipated meeting between President Trump and President Xi Jinping at G20 meeting which will decide the next market direction for Malaysia’s palm oil. It is forecast that the outcome is highly uncertain.
If the meetings go badly, President Trump said that he would proceed to imposing a tariff on the remaining US$267 billion Chinese goods and raise the tariff to 25 per cent from 10 per cent previously on US$200 billion Chinese goods. Vice versa, the positive outcome from this meeting could cause the US soybean oil to rally and Malaysia’s palm oil to benefit from the boost in palm oil prices which are affected by the movement of other rivalry oils.
Overall, the market is still in bearish sentiments, as the stockpiles from top producers of the tropical oil – Malaysia and Indonesia, are still within expectations to rise until the end of the year, due to the demand from key buyers which typically slows due to palm oil solidifying in the winter months.
Spot ringgit depreciated 0.1 per cent to 4.1960 against the US dollar, compared with 4.1920 on Friday.
Technical analysis
From the hourly chart, a higher low was formed, indicating a rebound is imminent. With RSI heading towards 60, FCPO may be heading towards a bullish zone of 70. An inverted head-and-shoulder also formed which further solidified the FCPO rebound which may occur soon. The FCPO also broke above EMA 20 and EMA 50 and went sideways, which showed that FCPO might be gathering force to retest the first resistance level. Overall, the market still remains bearish and a change of trend might not be soon.
In the coming week, the FCPO might continue to trade higher. If FCPO fails to break above the first resistance level, it may trade towards the first support level.
Resistance lines will be positioned at 2,075 and 2,100, whereas support lines will be at 2,000, and 2,025. These levels will be observed in the coming week.
Major fundamental news this coming week
AmSpec and SGS reports will be released on November 26 (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.