16/01/2017 (Borneo Post) - Malaysian palm oil futures continue to range bounce between 3,150 and 3,080 for the week on weaker production reports and stronger ringgit.

Crude palm oil futures (FCPO) benchmark March 2016 contract settled at 3,118 on Friday, up 43 points or 1.4 per cent from 3, 075 last Friday.

Trading volume increased to 227,041 contracts from 117,431 contracts from last Monday to Thursday.

Open interest based increased to 810,558 contracts from 603,435 contracts from last Monday to Thursday.

Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during January 1 to 10 rose 8.1 per cent to 351,907 tonnes compared with 325,509 tonnes during December 1 to 10.

Socete Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products for January 1 to 10 rose 10.7 per cent to 338,777 tonnes from 305,990 tonnes shipped during December 1 to 10.

Overall, demand strengthened China, with 30 per cent increase in the first 10 days of January compared with the same period last month on restocking ahead of the Lunar New Year celebrations. Spot ringgit stayed around 4.46, Malaysia’s central bank said on Friday it might adopt additional measures to deal with volatility in foreign exchange markets if necessary.

The MPOB’s data showed a surprise rise in end-stocks to 1.67 million tonnes as output fell more than forecast, down 6.4 per cent from November to 1.47 million tonnes. Exports, however, fell 7.5 per cent in December from a month earlier. On Monday, Bursa Malaysia Derivatives market gained on expectations exports would pick up this month while production remains weak.

On Tuesday, palm oil erased earlier gains due to higher than forecast inventory levels from a government report released during the session’s midday break.

On Wednesday, the crude palm oil market rose as the edible oil tracked stronger rival oils on the Dalian Commodity Exchange, boosted by demand from China.

On Thursday, the price fell for second consecutive day, tracking Dalian vegetable oil markets losses and a strengthening ringgit weighed on market bearish sentiment.

On Friday, Malaysian palm oil futures climbed to their strongest levels in a week on Friday morning, lifted by improving demand and tight supply but retraced during second session to close nearly unchanged.

Technical analysis

According to the weekly FCPO chart, weekly candlestick opened higher as the Bollinger Bands continued moving upward and provided an uptrend signal in long term. By the end of the week, MACD histogram value showed a decreasing sign which could indicate reducing presence of buying momentum.

On Monday, daily candlesticks stayed near to the middle Bollinger band but showed no sign for direction yet despite higher than usual volume.

On Tuesday, Bollinger Bands mostly headed sideways while market was unable to stay above the middle Bollinger Band and this suggested that market could move toward the lower Bollinger Band.

On Wednesday, daily candlesticks consolidated within the previous candlesticks price range, trader was cautious due to prolonged sideway trend.

On Thursday, market direction remained uncertain while the market potentially headed downward as market failed to break and stay above 3,200.

On Friday, market continued to test resistance at 3,150 but failed to go above it and instead closed with little change, creating mixed signal.

In the coming week, the price has the potential to range between 3,202 and 3,052.  Resistance lines are expected at 3,202 and 3,168, support lines are expected at 3,083 and 3,052, these levels will be observed in the coming week.

Major fundamental news this coming week

ITS and SGS report released on January 16 (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.