Crude Palm Oil Weekly Report – September 29th, 2018
Malaysia palm oil futures (FCPO) edged higher on Friday, on the back of stronger crude oil price and a stronger ringgit, recovered from losses a sharp decline of price from last two week trading sessions due to buildup of inventories in Indonesia and Malaysia.
FCPO settled higher at 2,170, an increase of 1.43 per cent from last Friday’s closing price at 2139, a totaled of 31 points.
The change of average trading volume and open interest from 36,704 contracts until 30,043 contracts from last Tuesday to Thursday, a totaled of 18.15 per cent decline is due to lack of one trading day on Monday.
The same goes for the daily average open interest as there was a totaled of 254,061 contracts, a 4.9 per cent decreased to 267,164 contracts in daily average open interest during this week Monday to Thursday as compared from last Tuesday to Thursday.
AmSpec reported a surge of 61.51 per cent of export data for September 1 to 25 to 1.327 milliong MT, from 821,485 MT shipped during August 1 to 25.
Besides, Societe Generale de Surveillance (SGS) also reported a hike of 72.80 per cent export of Malaysian palm oil products during September 1 to 25 to 1.36 million tonnes from 786,947 tonnes shipped during August 1 to 25.
FCPO managed to rebound from a nosedive of price from the last two weeks of trading days, starting from 2,319 at September 5 to 2,139 at September 21 thanks to the increased in oil prices, a more than two per cent to four-year high on Monday when OPEC refused to increase in output despite called by US President Donald Trump for action to raise global supply.
In addition, the economic sanctions by US against Iran also supported the price. US soybean oil also buoyed by the uptrend of crude oil which underpinned FCPO in the reversal of price happened on September 24.
Palm oil prices are affected by movements of other edible oils, as they compete for a share in the global vegetable oils market.
However, the rally lost steam and a changed of price occurred at September 27. This was mainly due to traders concern about rising inventory of the vegetable oil used in a wide range of food and cleaning products.
Indonesia, world biggest output country of palm oil, seen palm oil inventories peaking at five million tonnes while Malaysia stocks are forecast to grow close to three million tonnes. Traders and investors may take clues from negative catalyst to adjust their trading plan.
Spot ringgit depreciated 0.23 per cent to 4.1405 against the US dollar, compared with 4.1310 on Friday.
The dollar was in fine fettle against its peers on Friday, advancing to a nine-month high versus the yen, after data reinforced upbeat views about the US economy and backed the Federal Reserve’s signal for a steady course of rate increases over the next year.
Technical analysis
In the previous trading session on this week, FCPO failed to break above the resistance formed around 2,190 and push the price back despite the previous rebound happened at 2145. This also indicated there is a strong support at 2,145. In addition, both the 25-day and 50-day EMA lines showed a death-cross since June 11. Since then, both lines continue to edge downwards, indicated a negative bias. Although RSI showed that it has escaped from oversold zone which is below 30, we still believe that FCPO might form a clear sign of reversal to occur soon.
Currently, FCPO showed no clear sign of trend reversal occur soon, we recommend traders to maintain their short positions.
To manage their risks, a cut-loss level at 2,180 is set. In the coming week, the FCPO might continue to trade downward, a support level of 2,155 is set and if FCPO failed to break below the first support level, it may trade towards the first resistance level at 2,180.
Resistance lines will be positioned at 2,190 and 2,180, whereas support lines will be at 2,155, and 2,145. These levels will be observed in the coming week.
Major fundamental news this coming week
AmSpec and SGS reports will be released on October 1, 2018 (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.