10/08/2015 (Borneo Post) - Malaysian palm oil futures edged lower on Friday to 2,042, nearing its 11-month lows, tracking comparative oils lower and on demand concerns ahead of trade data due out this coming week.

Future Crude Palm Oil (FCPO) benchmark for October 2015 contracts settled at 2,042 on Friday, down 80 points or 3.7 per cent from 2,118 last Friday.

Trading volume increased to 176,579 contracts from 172,264 contracts from last Monday to Thursday.

Open interest based on increased to 805,819 contracts from 759,439 contracts from last Monday to Thursday.

Spot ringgit weakened on Friday to 3.9220, while the ringgit hit another pre-peg 17-year low earlier, as the Malaysian ringgit extended losses against the US dollar for the eighth consecutive days amidst domestic political uncertainties as well as renewed downward pressure on crude oil prices.

According to a Reuter’s survey, Malaysian palm oil stocks swelled in July as production increased to 1.78 million tonnes, up one per cent from June.

The lower demand during the end of the Muslim holy month of Ramadan also added to inventory levels, which are seen to have risen to 2.19 million tonnes, up 1.6 per cent from June.

Lastly, Malaysian palm oil exports are predicted to fall 6.9 per cent to 1.58 million tonnes.

Malaysian stocks are not expected to see any significant short-term change as higher output will offset benefits from any drop in Indonesian supply stemming from an export levy there, said Voon Yee Ping, an analyst at Kenanga Research.

On Monday, the price fell, touching the lowest in 11 months, as other vegetable oils traded lower and expectations of weak demand and higher output in the coming weeks weighed on prices.

On Tuesday, the price rose, retreating from 11-month lows, while tracking crude oil prices and as traders covered short positions.

On Wednesday, the price reversed gains to hit an 11-month low, as worries about rising production and falling demand offset initial support from a weak currency and firmer comparative vegetable oils.

On Thursday, the price fell for a second straight session on Thursday to their lowest in almost a year, with pressure from slowing imports by top consumers India and China amidst expectations of higher production.

On Friday, the price declined for a third consecutive day, touching near 11-month lows, tracking comparative oils lower and on demand concerns ahead of trade data due out this coming week.

Technical analysis

According to the weekly FCPO chart, the price opened above the bottom Bollinger band, and below the previous sideways range support level at 2,135.

The price continued the previous week’s downtrend after it was unable to break above the middle Bollinger band.

By the end of the week, the price tested the bottom Bollinger band, closing below, while the SO enters oversold territory.

According to the daily FCPO chart, on Monday, the price opened above the bottom Bollinger band, and below the previous sideways support at 2,135, while the SO continued to remain within oversold territory.

By the later session, the price tested the support level at 2,050, closing above and the bottom Bollinger band, closing below, while daily volume was above average.

The price broke below this year’s low at 2,070, and the price could test the psychological barrier 2,000 in near term.

On Tuesday, the price opened below the bottom Bollinger band, and above support level at 2,050.

By the later session, the price tested the bottom Bollinger band, closing below.

At support level 2,050, it closed above.

On Wednesday, the price opened above the bottom Bollinger band and support level at 2,050.

The SO attempted to exit oversold territory, as the price moved above the bottom Bollinger band.

By the later session, the price tested the bottom Bollinger band and support level at 2,050, closing below.

On Thursday, the price opened below the bottom Bollinger band and support level 2,050.

A downside gap was formed from 2,040 to 2,020, which may be covered in the near term.

By the later session, the price tested the bottom Bollinger band, closing above, and covering the previous gap.

Daily volume was above the average.

On Friday, the price opened above the bottom Bollinger band, and below support level at 2,050.

By the later session, the price tested support level at 2,050, closing below, while the SO continued to remain within oversold territory.

In the coming week, the price has potential to range between and 2,000 and 2,100

Resistance lines will be placed at 2,090 and 2,130, while support lines will be positioned at 2,010 and 1,950, these levels will be observed this coming week.

Major fundamental news this coming week

ITS and SGS report released on August 10 (Monday).

MPOB report released on August 10 (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.