Malaysian palm oil futures fell on Friday to 2,558, on a stronger ringgit, but were on track for their first weekly gain in three on expectations of lower-than-expected output and steady Ramadan demand.
Future Crude Palm Oil (FCPO) benchmark August 2016 contract settled at on 2,558 Friday, up 31 points or 1.2 per cent from 2,527 last Friday.
Trading volume decreased to 177,416 contracts from 215,170 contracts from last Monday to Thursday.
Open interest based decreased to 1.112 million contracts from 1.122 million contracts from last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during May 1 to 25 increased 8.5 per cent to 965,253 tonnes compared with 889,944 tonnes during April 1 to 25.
Societe Generale de Surveillance (SGS) report showed that Malaysia’s palm oil exports during May 1 to 25 increased 11.2 per cent to 981,630 tonnes compared with 882,967 tonnes during April 1 to 25.
Overall, demand strengthened from the European Union, India and Pakistan, while demand weakened from China, and demand was unchanged from the US. Spot ringgit was mostly unchanged on Friday to 4.0760, and was poised for weekly rebound, but sentiment stayed cautious ahead of Federal Reserve chair Janet Yellen’s comments later in the day that will shed more light on the timing of a US rate hike.
On Monday, the price fell, touching the lowest in nearly three months, dragged down by losses in Chinese vegetable oils, while a stronger ringgit also weighed on sentiment.
On Tuesday, the price rebounded higher from a three-month low hit during the previous day, due to a weakening ringgit, coupled with gains in rival oils.
On Wednesday, the price climbed for the second consecutive day, making their sharpest gains in three weeks and outpacing a stronger ringgit as they track improving rival oils in China.
On Thursday, the price rose for the third consecutive day, amid expectations of slow output growth and sustained Ramadan demand.
On Friday, the price fell, after earlier touching the highest in more than a week on a stronger ringgit, but it was on track for their first weekly gain in three on expectations of lower-than-expected output and steady Ramadan demand.
Technical analysis
According to the weekly FCPO chart, the price opened below the middle Bollinger band and above psychological barrier at 2,500. During the week, the price tested the psychological barrier at 2,500, closing above. By the end of the week the price tested the middle Bollinger band and psychological barrier at 2,600, closing below.
On Monday, the price opened above the bottom Bollinger band and psychological barrier at 2,500, while the SO remained in oversold territory.
A downside gap was formed from 2,500 to 2,525, which if able to be covered, could indicate potential to close above bottom Bollinger band. During the later session, the previous gap was unable to be covered, while the price tested the bottom Bollinger band and psychological barrier at 2,500, closing below.
On Tuesday, the price opened above the bottom Bollinger band and psychological barrier at 2,500.
An upside gap was formed from 2,495 to 2,510, which if able to be covered, could indicate potential to test support level 2,470 in the near term.
By the later session, the previous gap was unable to be covered, while the price tested the psychological barrier at 2,500, closing above, while the SO remained in oversold territory. The price is attempting to cover the previous day downside gap formed from 2,500 to 2,525, which if covered, could indicate potential to test the middle Bollinger band and resistance level at 2,575 in the near term.
On Wednesday, the price opened above the bottom Bollinger band and below the psychological barrier at 2,500. By the later session, the price tested the bottom Bollinger band and the psychological barrier at 2,500, closing above, while the SO remained in oversold territory. The price was able to cover the previous downside gap, formed on May 23, from 2,500 to 2,525, which could indicate potential to test the middle Bollinger band and resistance level at 2,575 in the near term.
On Thursday, the price opened above the bottom Bollinger band and psychological barrier at 2,500, while the SO exited oversold territory. By the later session, the price tested the middle Bollinger band, closing below and tested resistance level at 2,575 closing above.
On Friday, the price opened below the middle Bollinger band and resistance level at 2,575. A downside gap was formed from 2,560 to 2,580, which if able to be covered, could indicate potential to test the middle Bollinger band and psychological barrier at 2,600. By mid-day, the previous gap was covered, while the price tested the resistance level at 2,575, closing above. By the later session, the price tested the middle Bollinger band and psychological barrier at 2,600, closing below.
In the coming week, the price has potential to range between 2,500 and 2,600. Resistance lines will be placed at 2,610 and 2,650, while support lines will be positioned at 2,510 and 2,470, these levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report released on May 31 (Tuesday).
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.