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Crude palm oil (CPO) futures on the Bursa Malaysia Derivatives were marginally lower on Monday after rising to their highest in nearly two-weeks after the Malaysian ringgit plunged to a five-year low, making dollar-priced palm cheaper for overseas buyers. However, continuous fall in energy markets is weighing on the edible oil complex. CPO active month February futures moved lower as expected. As cautioned in the previous update, break of important support at Malaysian ringgit (MYR) 2,180/tonne could see prices testing next important support near MYR 2,135-40 levels immediately followed by MYR 2,100 levels. Though a smart pullback was seen from the lows of MYR 2,083 levels, the bigger picture still looks weak and further downside pressure can be seen in the coming sessions. Resistances are seen near MYR 2,200-25/tonne levels now. Immediate support is at MYR 2,145-50 levels and failure to hold support here could drag prices further to recent lows or even lower to MYR 2,075 levels being a trend line support point.
Expects prices to edge lower towards MYR 2,150/tonne levels initially, followed by MYR 2,075 levels, while resistances cap upside attempts. Only an unexpected close above MYR 2,255/tonne levels could revive bullish hopes again.
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 a larger up move 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 the supports levels. Supports are at MYR 2,145, 2,105 and 2,075. Resistances are at MYR 2,210, 2,245 and 2,275.
The author is the Director of Commtrendz Research and there is risk of loss in trading.
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