Crude Palm Oil Weekly Report – 31 August 2017
Malaysian palm oil futures pulled back from last week’s gains and traded lower, weighed down by expectations that production in August would rise slightly and profit taking by traders would occur ahead of the long holiday weekend.
The benchmark crude palm oil futures (FCPO) contract dropped 1.64 per cent to RM2,706 on Wednesday, which was RM45 ringgit lower than RM2,751 during the previous week.
The average daily trading volume during Monday to Tuesday fell 31.46 per cent with a total of 69,049 contracts traded, in contrast with 251,851 contracts traded during last Monday to Thursday.
Daily open interest during Monday to Tuesday increased 25.5 per cent to 427,867 contracts from 852,314 contracts during last Monday to Thursday.
The Bursa Malaysia Derivatives Exchange market was closed on Thursday and Friday for the public holidays.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for August 1 to 25 dropped 8.1 per cent to 934,544 tonnes, from 1.017 million tonnes shipped during July 1 to 25.
Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during August 1 to 25 fell 8.4 per cent to 956,547 tonnes from 1.044 million tonnes shipped during July 1 to 25.
Both cargo surveyor reports forecast a decline in exports demand on palm oil related products from the previous month (July). Palm inventories were higher in August as exports are expected to fall from the previous month while production would likely be higher.
Spot ringgit appreciated 0.14 per cent to 4.2665 against the US dollar last week, compared with 4.2725 on Friday, in the previous week.
The dollar hit a four-month low against the yen on Tuesday after North Korea fired a missile that passed over northern Japan, the latest act of provocation by Pyongyang that has ramped up global tensions.
On Monday, Malaysian palm oil futures were weighed down by expectations that production in August would rise slightly and by a stronger ringgit.
On Tuesday, Malaysian palm oil futures fell by nearly one per cent, hitting their lowest in a week under pressure from weakness in related edible oils as traders took profits ahead of the long holiday weekend. On Wednesday, Malaysian palm oil futures fell for a fourth straight session, ahead of the long weekend in Malaysia, due to expectations of a rise in inventories.
Technical analysis
According to the FCPO daily chart, the market pulled back after failing to break through the resistance level at 2,770.
On Monday, Malaysian palm oil futures traded lower for two consecutive days, with the benchmark contract closing at 2,736, which is 15 points lower than the previous closing price.
On Tuesday, Malaysian palm oil futures traded lower for three consecutive days and fell to a one-week low, with the benchmark contract closing at 2,711, which is 25 points lower than the previous closing price.
On Wednesday, Malaysian palm oil futures opened higher and dipped to a one-week low since August 22, 2017, with the benchmark contract closing at 2,706, which is five points lower than the previous closing price.
Last week, the market traded lower for four consecutive sessions.
However, volumes between these days are declining which showed that the selling pressures are weakening.
Broadening of Bollinger bands could indicate a potential upward momentum in the market. In the coming week, the market is anticipated to rebound at support level of 2,690 to 2,700.
Resistance lines will be positioned at 2,770 and 2,810, whereas support lines will be positioned at 2,680 and 2,650. These levels will be observed in the coming week.
Major fundamental news this coming week
MPOB, ITS and SGS reports will be released on September 10.
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.