Technical Analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional

31/03/2014 (Borneo Post) - Malaysian palm oil futures ended at a near flat on Friday but ended lower by 2.8 per cent for the week and a third straight weekly loss due to investors’ uncertainties over lacklustre demand for the tropical oil. Futures crude palm oil (FCPO) settled at 2,655 and volume increased to 289,213 contracts compared to last week at 231,429 contracts. Open interested last Thursday, saw a decreased at 188,233 contracts compared to last week at 190,689 contracts.

For the first 25 days of March, Cargo Intertek Testing Services (ITS) reported a 11.5 per cent drop in export figures at 927,290 tonnes compared to the first 25 days of February at 1.048 million tonnes. Cargo Société Générale de Surveillance (SGS) too reported a 11.2 per cent drop in export figures at 933,593 tonnes for the first 25 days of March compared to February’s at 1,051,836 tonnes. Overall, market players are anticipating Malaysia’s palm oil exports for March to be weaker than a month ago as major consumers trimmed back purchases.

Top analysts and industry officials have cautioned that India, the world’s largest edible oil importer, would cut back on palm this year in favour of other cheaper edible oils. An official with Ruchi Soya Industries Ltd which is one of India’s biggest edible oil buyers said that palm imports would drop significantly to around 7.4 million tonnes from 8.17 million tonnes last year as price spreads in favour of soft oils.

However, prices may soar to RM3,500 if the El Nino returns in the second half of 2014 which may hinder yields of fresh fruit and reduce supplies of crude palm oil in major producers like Malaysia and Indonesia. The potential decrease in demand may also lead to buyers turning to rival vegetable oils. Indonesia, which is the world’s top producer of palm oil, hiked its export tax for crude palm oil to 13.5 per cent in April from 10.5 per cent in March while Malaysia which is the No.2 producer, has set its own export duty at a more competitive rate at 5.5 per cent.

Malaysian ringgit strengthened throughout the week to 3.268 as speculation grew over China’s economic stimulus. Chinese Premier Le Keqiang was quoted saying that the country has the policy tools in store to support the economy and will roll out support measures for China economy. Normally, a stronger ringgit may deter demand from overseas as it is more costly to purchase palm products.

Technical view
Based on our previous commentary, should price violate the previous green horizontal line which we drew last week, price may test the longer trend support line. Currently, we are observing whether price may rebound from Friday onwards. Should price managed to hold on strongly at this level, we will still keep bull trend point of view intact.

Please take note that the price also nearly touched the exponential moving day average 100 day at 2,640 where the lowest for the week touched at 2,643. Based on previous occasions, when price is hovering near at this moving average, price may find support above the moving average line.

However, do take note that there will be occasions where price may false break below hence it is advisable to focus more on the closing price of the candlesticks for the week.

For the coming week we pegged our important support levels at 2,640, 2,600 and 2,580-75. Meanwhile, for our resistance levels, we pegged important ones at 2,720-30, 2,780 and 2,800.

Major fundamental news this coming week
ITS and SGS Export reports on March 31 (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.