The Malaysia palm oil futures (FCPO) fell 2.36 per cent for three consecutive sessions, on expectations of rising production and end-stocks in producer nations Indonesia and Malaysia but it managed to rebound on Friday, underpinned by stronger related oil on US soybean oil and it also drew support from unchanged zero export tax for October.
FCPO settled higher at, a decrease of from last Friday’s closing price at 2,222.
There were an increase of average trading volume from 30,043 to 60,743, a totaled of 50.54 per cent surge, was contributed by three trading days only from the previous week.
However, there were only 5.06 per cent, or 13,545 contracts, which was an increase in daily average open interest from Tuesday to Thursday as compared with 254,061 contracts from last Wednesday to Thursday.
AmSpec reported a near 70 per cent rise of export data for September 1 to 20 to 1.051 million MT, from 609,098 MT shipped during August 1 to 20.
Societe Generale de Surveillance (SGS) also reported a hike of 75.06 per cent export of Malaysian palm oil products during September 1 to 20 to 1.095 million tonnes from 625,819 tonnes shipped during August 1 to 20.
US President Donald Trump imposed a 10 per cent tariffs on about US$200 billion worth of Chinese imports goods, causing a seismic pressure towards global edible oils, including Malaysia’s palm oil futures which fell 41 points on Wednesday from 2,198 to 2,157.
The escalating trade dispute between China and US sparked fear in global edible oil market and forced investors and traders to liquidate their positions. Moreover, the rise of production towards the year end in line with seasonal trends in both producer nations (Malaysia and Indonesia) also weighed down on price.
The weather conditions in Indonesia also helped cultivation.
Normally, the rise of production and inventories will caused the price of commodities to become cheaper to purchase.
However, despite the continuity of zero export tax for October, it is unlikely to offset the losses caused by both negative catalysts mentioned above.
Chicago September soybean oil contract jumped 1.3 per cent on Thursday on strong demand, with US soybean exports sales surpassing trade expectations.
Palm oil prices are affected by movements of other edible oils, as they compete for a share in the global vegetable oils market.
Spot ringgit appreciated 0.25 per cent to 4.1310 against the US dollar, compared to 4.1415 on last Friday.
As of September 21, our technical analysis on the FCPO has indicated the bearish momentum is still in control as the EMA 25 crossed below the EMA 50.
For the trading week starting September 18, the FCPO dropped for five consecutive days, supporting our earlier analysis of bearish momentum.
On Tuesday, FCPO gapped down 47 points from the previous closing price of 2,245.
It broke through a strong support at 2,183 and continued to trade downwards.
As supported by RSI which dived down from 61 till 29, it fell in the oversold zone. In the coming week, the price might test the first support level at 2,130.
If it manages to break below this level, it will continue to trade until the second support level.
Otherwise, it will trade towards the first resistance level at 2,185.
Resistance lines will be positioned at 2,225 and 2,185, whereas support lines will be at 2,130, and 2,110.
These levels will be observed in the coming week.
Major fundamental news this coming week
AmSpec and SGS reports will be released on September 25 (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.
Source: Borneo Post Online