The Malaysian palm oil futures (FCPO) closed with its third consecutive gains as US soybean oil strengthened and lifted by global stock markets. However, the stronger ringgit capped further gains.
On Friday, FCPO decreased 1.79 per cent to 2,118 compared with last Friday’s closing price at 2,156, a totaled of 38 points.
Average trading volume dropped from 51,538 contracts to 31,102 contracts from the previous week, a total decline of 65.71 per cent, due to the shortened trading days.
Moreover, there was a 10.76 per cent decrease to 223,899 contracts from 247,986 contracts in the daily average open interest as compared with the previous week due to the shortened trading days.
The latest AmSpec showed that palm oil products exports were down 6.36 per cent on December 1 to 25, a total of 973,561 MT, from 1.04 million MT shipped during November 1 to 25.
Societe Generale de Surveillance (SGS) showed an increase 0.35 per cent in exports of Malaysian palm oil products during December 1 to 25 to 1.08 million tonnes from 1.074 million tonnes shipped during November 1 to 25.
US soybean oil edged up on Friday, despite the lack of news from US Department of Agriculture due to the partial shutdown of US federal government.
The most active soybean contract on Chicago Board of Trade (CBOT) edged up 0.3 per cent to US$8.85 a bushel.
Despite the absence of US export sales data, market analysts and traders made assumptions that the US export data for the week ended December 20 were 1.8 million to 2.8 million tonnes.
As for the weather, Brazilian farmers are bracing for losses as below-normal rainfall in the country’s main soybean producing areas are expected during the first few days of 2019. This will assist in supporting the soybean oil prices.
Palm oil prices are impacted by changes in soyoil prices, as they compete for a share in the global vegetable oil market.
The continuous rally of global stocks also buoyed the palm oil market sentiments. US stocks traded in positive territory at the end of the trading week.
MSCI’s broadest index of Asia-Pacific shares besides Japan rose 0.8 per cent.
However, factors such as the US–China trade war, slowing global growth and wariness towards Federal Reserve’s possible tightening cycle might continue to dent market’s risk appetite and encourage investors to head towards safe-haven instruments such as the yen and gold.
Spot ringgit appreciated 0.57 per cent to 4.1560 against the US dollar, compared with 4.1795 on last Friday.
The dollar consolidated overnight losses on Friday and is set for its biggest weekly drop in 10 months driven by the threat of a US government shutdown and lower bond yields on the back of concerns of slowing economic growth weigh.
FCPO resumed the drop after it failed to break above 2,200 psychological resistance level last week and fell below EMA 50 and EMA 25, indicating bearish sentiments and selling pressure are still strong.
After it retraced to another key support level at 2,100, it rebounded and is now heading towards testing the resistance level at EMA 25 at 2,132. In order to continue the rally, FCPO will need to break through this level as well as EMA 50 at 2,167.
Overall, FCPO still remains in bearish territory and such rebound is considered as a short-term rebound as there is no sign of trend changing soon.
In the coming week, 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 2,200 and 2,143, whereas support lines will be at 2,100 and 2,073. These levels will be observed in the coming week.
Major fundamental news this coming week
AmSpec and SGS reports will be released on December 31, 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.