Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives fell from the peak of 2,400 to as low as 2,295 at end the week in a bearish note. Despite the Malaysian Palm Oil Board (MPOB) report leaning towards positive sentiment, the bearish export figures from both MPOB, Intertek Testing Services (ITS) and Societe Generale de Surveillance (SGS) reports dominated the week’s selloff.
According to the MPOB report, stocks were recorded at 1,646,531 tonnes compare to May revised figure at 1,816,343 tonnes and also below the Reuters Survey of 1,740,000 tones. Production was recorded at 1,415,745 tonnes compare to May’s 1,384,330 tonnes which was also below the Reuters Survey of 1,467,371 tonnes. Exports on other hand were recorded at 1,411,805 tonnes compare to May’s 1,407,747 tonnes which was below the Reuters Survey of 1,450,000 tonnes.
Starting at the second half of the year, cargo surveyor ITS reported that exports of Malaysian palm oil products for July 1 to 10 fell 15.9 per cent to 352,375 tonnes, from 419,035 tonnes during June 1 to 10. Moreover, cargo surveyor SGS reported that exports of Malaysian palm oil products for July 1 to 10 fell 16.3 per cent to 334,929 tonnes from 400,075 tonnes shipped during June 1 to 10.
Looking at the MPOB report, the supply side is definitely bullish, however the demand side said otherwise. As we mentioned in the previous week, palm oil traders should take note of the weaker demand post-Ramadan and the upcoming rising production which could depress palm prices. The weakness in export reports guided traders to believe that should exports dwindle in the coming weeks, stocks will eventually pick up, not to mention the higher production cycle begins at the second half of the year.
Investors were also concern that the weak export picture could stretch into the months ahead, hence it triggered a technical selloff which caused prices to fall to their lowest in more than two months. Traders remained cautious ahead of export data for the first 15 days of July due on July 15. Palm may face pressure in the second half of the year as top buyers especially China, are expected to curb purchases due to economic uncertainty. Meanwhile, US dollar slid as the Federal Reserve stated that stimulus is not expected to cut early as the investors expected. A weaker greenback against the ringgit makes the feedstock more expensive for overseas buyers and refiners.
The benchmark FCPO September contract settled RM2,301 per tonne on Friday which was down 84 points from last Friday at RM 2,385. The trading range for the week was from RM2, 400 to RM2, 295. Price was choppy especially during the latter part of the week as bullish traders and bearish traders were fighting to dominate the market.
Total volume traded for the week amounted to 173,713 up 16,569 contracts compared with last Friday’s 157,144 contracts. The open interest as of Thursday increased 1,553 contracts to 180,389 from 180,389 contracts from previous Thursday.
As we can see from the chart, price broke and closed below our daily support line (black line), hence technical selling was triggered as the market was trying to find a bottom. Moreover, our Fibonacci’s 61.8 per cent (2,330) has been violated below as well in which we believed assisted the technically selling further. Currently, we believed the market is in a bearish tone and it may try to revisit the previous bottom at 2,220. We advise traders to watch out for a potential rebound correction next week.
For the coming week we pegged our important support levels at 2,295, 2,280, 2,250 and 2,200.
Meanwhile, for our resistance levels, we pegged important ones at 2,330 and 2,345 and 2,470 level. Investors and traders are advised to watch for fundamental news in the coming week.
Major fundamental news this coming week
Malaysian export data for June 1 to 15 by ITS and SGS on July 15 (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.
Source : The Borneo Post