CPO Futures – Awaiting Leads From Soybean Market

Encouraged by the surge in the US soyabean complex futures markets and the latest palm oil export estimates, the Kuala Lumpur CPO futures took a large step up the price chart last week.

However, the technical indicators suggest it was not enough to turn the short-term bear into a bull. Indeed, what last week’s 11th hour rally has done is to push this market into overbought territory, from which a pullback is likely in early trade this week.

The local market shilly-shallayed at first, fluctuating and meandering within tight trading ranges from RM2,000 to RM2,100. exploding only last Friday when it not only punched through the erstwhile RM2,160 overhead resistance level but also the RM2,200 in intra-day trade . The actively-traded October 2009 contract closed on Friday at RM2,189 a tonne, up RM67 or 3.45 per cent over the week.

US soyabean and soyabean oil futures soared last Thursday to three-week highs on bullish fundamentals and weather concerns. Soyabean oil for August delivery tacked on 1.17 US cents, or 3.07 per cent, closing last week at 34.93 US cents a pound.
The US Department of Trade put soyabean stocks at a 32-year low, depleted by China’s voracious appetite. China estimated that its purchase of soyabeans in July had reached a record 4.82 million tonnes.

By a fortuitous coincidence the export estimates for July 2009, released last Friday were most encouraging. Export monitors Societe Generale de Surveillance and Intertek Technical Services put July exports at a combined average of 1.4 million tonnes, up 176,000 tonnes or 14.35 per cent compared to that shipped out in June.

Conclusion: This market is now geared to the US soyabean and soyabean oil markets.

The technicals suggest that, if not for extraneous factors, the local CPO futures market would not have had it to put on last week’s show of confidence. Source : Business Times

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