Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives dived this week, weighed down by the poor economic data in Europe and US coupled with the technical selling.
The benchmark FCPO July contract plunged RM147 or 4.19 per cent to close at RM3,358 per tonne on Friday from RM3,505 per tonne last Friday.
The trading range for the week was from RM3,335 to RM3,505.
Total volume traded for the week amounted to 113,751 contracts, down 2,786 contracts from the previous week.
The open interest as at Thursday increased to 128,166 contracts from 123,053 contracts the previous Thursday.
The economic data released in Europe and US this week were mostly unsatisfactory, triggering a broad based selling from equities to commodities.
The traders remained concern about the health of the global economy which would also affect the demand for the commodities.
Besides, traders would also pay special attention to the election in Greece and France this coming Sunday as the results of the election might give a big impact to the equities movement next week.
The fundamental in palm oil became mixed this week with good export demand on one side and the rise in production on the other hand.
Cargo surveyor ITS released the palm oil export figures for the full month of April on Monday at 1,349,642 tonnes, a surge of 9.42 per cent while another surveyor SGS at 1,337,150 tonnes, a jump of 10.4 per cent from the same period last month.
However, the bullishness in palm oil market was halted with some traders anticipated the production in April might increase 10 per cent which would leave the stock level mostly unchanged.
The palm oil production was expected to recover from April onwards and the question mark now was whether the export demand would be strong enough to offset the production growth in the coming months to keep the palm oil stock below two million tonnes? Meanwhile, the outlook for crop progress in US was fabulous with favourable weather condition currently enabling the farmers to progress significantly in their crops planting.
So far the US crop was planted way ahead of the five-year average during this time of the year, signalling the farmers may have good production this year if there is no weather threat in the coming months.
The significant advance in US crop progress had also weighed on the new crop contracts in US grain futures.
Chicago Mercantile Exchange (CME) was scheduled to expand its grain futures trading hours from 17-hour to 22-hour starting from May 21.
Technical View
The benchmark July contract broke the major support at RM3,445 on Thursday, triggering a lot of technical selling after the market had been consolidating for two weeks.
The July contract also pierced through EMA50 line indicating the palm oil sentiment had changed from bullish to neutral in the medium term.
With the uncertainties looming in the election in France and Greece coupled with the major fundamental reports to be released next week, this may create volatility in the market.
Resistance would be pegged at RM3,439 and RM3,628 while support was set at RM3,334 and RM3,270.
Major fundamental news this coming week
MPOB’s monthly supply-demand report on May 10, Malaysian export data for May 1 to May 10 by ITS and SGS on May 10 and USDA’s monthly supply-demand report on May 10.
Oriental Pacific Futures is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. They can be reached 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
