Crude palm oil futures on the Bursa Malaysia Derivatives plunged on Monday as crude oil hit five-year lows and export data showed weakening global demand for palm oil. Cargo surveyor Societe Generale de Surveillance reported that exports fell 10.5 per cent from a month ago due to weaker demand. CPO active month February futures are lower in line with our expectations. As mentioned in the previous update, a fall below MYR 2,185/tonne could see prices testing next important support near 2,135-40 levels immediately followed by 2,100. And a close below MYR 2,175/tonne could be a trigger for a fall that could see prices heading towards 2,100 levels or even lower to 2,050. The present fall could accelerate further if prices fail to hold supports near the important MYR 2,030-40. Such a decline could see prices testing recent lows at 1,900 levels. Chances exist even for a further decline towards MYR 1,850 levels in the coming weeks. Stiff resistance will be seen at MYR 2,175-85/tonne levels now.

As mentioned earlier, a downtrend again could be confirmed on a close below MYR 2,175/tonne levels. This once again puts the spot light on the MYR 1,700-mark, which we anticipated earlier. We are now tracking a final leg of an impulse in a declining trend with potential targets near MYR 1,850 or even lower to MYR 1,700 levels. Ideally, the next leg of an upmove could potentially begin from this area. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator hinting at a bearish reversal. Only a crossover again above the zero line again could hint at resumption in the bullish trend.

Therefore, look for palm oil futures to test resistances and then decline.

Supports are at MYR 2,075, 2,030 and 1,925. Resistances are at MYR 2,175, 2,210 and 2,235.

The author is the Director of Commtrendz Research and there is risk of loss in trading.

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