04/06/2012 (Borneo Post) - Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives plunged this week due to the weak economic data released in the world major economic countries and the fear of the eurozone debt crises was deepening.

The benchmark FCPO August contract tumbled RM124 or 3.96 per cent to close at RM3,006 per tonne on Friday from RM3,130 per tonne last Friday.

The trading range for the week was from RM3,002 to RM3,193. Total volume traded for the week amounted to 132,040 contracts, down 69,781 contracts from the previous week.

The open interest as at Thursday decreased to 98,195 contracts from 101,849 contracts the previous Thursday.

The palm oil market was lifted earlier of the week due to the improved sentiment on the polls over the weekend showing New Democracy party who supported austerity measures gaining more support from the people in Greece.

The rising demand from India and Pakistan before the fasting month starting in mid-July also helped to boost the market.

Cargo surveyor ITS released the palm oil export figures for the full month of May on Thursday at 1,382,091 tonnes, a rise of 2.4 per cent while another surveyor SGS at 1,333,869 tonnes, a drop of 0.25 per cent from the same period last month.

However, the rebound of the palm oil market was short lived when the economic data released in the world major economic countries from Asia, Europe to US were disappointed.

The manufacturing sector in China and US expanded slower than the market expectation in May, indicating further slowdown in the economic growth in the world’s top two largest economies while the manufacturing sector in German, France and UK had contracted faster last month.

The US gross domestic product in the first quarter only increased at an annual rate of 1.9 per cent, lower than the market estimate of 2.2 per cent growth and decreasing from the 3 per cent growth in the fourth quarter last year.

The jobs growth in US were disappointing and showing substantial slowdown in May while the unemployment rate in eurozone hit the record high of 11 per cent in April.

The banking crisis in Spain pushed government bond yields to an alarming level, dragging Italian bond yield higher as well which might further push up both countries’ borrowing costs to an unsustainable level.

Too many uncertainties lingering in the eurozone area would create high volatility in the market in the coming weeks.

The worsening situation in Europe had slowly impacted the economic condition in US and China which might pressure the governments to implement stimulus package to ‘jump start’ the economy.

Technical View
The benchmark August contract only managed to rebound to the first resistance of RM3,190 level before tumbling down to near the support level at RM3,000.

The daily chart of most of the major world indices had broken and closed below the consolidation phase which was not a really good sign and may fall further in the coming weeks.

We believe this would drag all the markets across the board lower if there is no stimulus package implemented and palm oil market may continue its bear trend if RM3,000 level was unable to hold.

Resistance would be pegged at RM3,190 and RM3,270 while support was set at RM3,000 and RM2,917.

Major fundamental news this coming week
No major fundamental reports to be released next week.