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Malaysian crude palm oil futures ended higher on Friday supported by a weaker ringgit and rising energy prices. A weaker ringgit against the dollar makes ringgit-based palm oil cheaper for overseas buyers. Energy prices often helps support to vegetable oils, including palm oil, because of their growing use in making bio-diesel, which competes with petroleum diesel. Palm oil prices also were helped by expectations of better exports in the coming months, ahead of festival se ason in China, India and the Muslim holy month of Ramadan.

CPO active month contract corrected lower in line with our expectations. The rebound has also been impressive triggering hopes for a gradual test of the recent highs at 2700 Malaysian ringgit (MYR) a tonne or even higher. Only a fall below 2300 MYR/tonne could cause doubts on this bullish outlook. Favoured view still expects a rise towards the psychological 3000 MYR/tonne as long as 2300 MYR/tonne levels holds downside attempts. Supports will now be seen at 2525 MYR/tonne followed by 2450 MYR/tonne. A new impulse began from 1427 MYR/tonne as per the recent wave counts. We are in the fifth wave move of that impulse. We can expect a corrective A-B-C to begin after the current impulse ends. RSI is in the neutral zone indicating that it is neither overbought nor oversold and has started showing signs of minor negative divergence indicating bearishness to set in soon and caution against aggressive longs. The averages in MACD are still above the zero line in the indicator suggesting bullishness to be intact. Therefore, look for palm oil futures to test the support levels and then rise higher again.

Supports are at 2525, 2450 & 2325 ringgits. Resistances are at 2625, 2745 & 2810 ringgits.

Gnanasekar. T

(The author is the Director of Commtrendz Research and also in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

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