Malaysian crude palm oil futures on Bursa Malaysia Derivatives exchange rose higher on Friday on position adjustment ahead of a slew of data which could give further clues on direction. Edible oil markets remain muted over the past couple of sessions ahead of the industry data. The US Department of Agriculture's supply-demand report on Monday will update the agency's crop forecasts in the light of hot and dry weather hurting US soya yields. Expectations of bullish USDA numbers are holding the market presently. Hot and dry weather has hurt US soyabean yields, making crude palm oil at least $200-20 cheaper than soya oil, that could hopefully shift demand to the tropical oil.

CPO futures are consolidating with a mild bullish bias. Price structures are still conducive for an upside move in the near-term. Daily close above 3,045 Malaysian ringgit (MYR) a tonne has opened the way for November futures initially towards 3,095-3,100 MYR/tonne and then eventually towards a target area near 3,150-75 MYR/tonne levels. Supports are at 3,015 followed by 2,995 MYR/tonne now. Fall below 2,965 MYR/tonne could dent our bullish expectations. Soya oil looks very impressive with potential targets in the 61-62c zone. Bullishness in the soya complex could rub off on the palm oil markets as well. Indicators have turned friendly for the soya complex, but CPO has not yet given a similar signal.

We believe the impulse that began from 1,427 MYR/tonne, which hit 4,486 MYR/tonne ended and a prolonged corrective move has possibly ended at 1,335 MYR/tonne. In the big picture, a new impulse began from 1,335 MYR/tonne and the third wave with a projected objective of 3,900 MYR/tonne has been met. A corrective wave “B” has met one potential target near 3465 MYR/ton. A wave “C” kind of a decline looks likely with potential to test even 2,600 MYR/tonne in the bigger picture. Fall below 2,960 MYR/tonne will confirm that the downtrend has begun. RSI is in neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator again indicating bearishness to be intact.

Therefore, look for palm oil futures to test the resistance levels in the coming sessions.

Supports are at MYR 3,025, 2,975 and 2,920. Resistances are at MYR 3,075, 3,100 and 3,150.

(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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