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Malaysian palm oil futures on the Bursa Malaysia Derivatives were lower on Monday on the back of a strengthening ringgit, with lacklustre export demand continuing to pressure prices.
Malaysia’s recent announcement of abolishing fuel subsidies has strengthened the currency. Though the supply situation could offer some support in the coming months due to the rainy season hampering harvest, export demand could dwindle as cold temperatures are not favourable for importers. However, energy markets were steady, with benchmark Brent crude prices remaining above $80 a barrel following a rally late on Friday over China’s interest rate cut and ahead of a possible output reduction by producer group OPEC.
CPO active month February futures are inching lower with a bearish bias. As mentioned in the previous update, the big picture charts are yet to show a convincing reversal in trend from bullish to bearish.
The important support level at the crucial MYR 2,180-95/tonne range has to be convincingly broken, being a trend line support zone. Such a fall could see prices testing next important support near 2,135-40 levels immediately followed by 2,100 levels.
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 levels in the coming sessions.
Favoured view still expects prices to get support near MYR 2,180-95 range. Failure to hold support here will result in a sharp decline towards levels mentioned above.
As mentioned earlier, we are now more inclined to an impulsive move towards MYR 2,295-2,300/tonne levels or even higher to 2,410. This could either be a corrective move within a larger downtrend.
Only a rise above 2,600 could revive hopes of a new impulse, which can carry prices much higher towards 2,900. This could be a beginning downtrend again and such a move will be confirmed on a close below MYR 2,175/tonne levels.
RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator hinting at a bullish reversal. Only a crossover again below the zero line could hint at resumption in the bearish trend. Therefore, look for palm oil futures to test the supports levels. Supports are at MYR 2,185, 2,135 and 2,100. Resistances are at MYR 2,255, 2,275 and 2,300.
The writer is the Director of Commtrendz Research and there is risk of loss in trading.
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