Malaysian palm oil futures on Bursa Malaysia Derivatives exchange ended higher on Friday, reversing earlier losses caused by a strong ringgit that will result in lower realisation for refiners. Slowing demand and a strengthening currency continues to pressure crude palm oil futures.
On the demand side, Malaysian palm oil exports for January eased close to 12 per cent and 13 per cent, according to cargo surveyors Intertek Testing Services and Societe Generale de Surveillance.
The decline was also a result of the shift in orders to Indonesia, which slashed export taxes for processed oils. Upbeat global manufacturing data from the US, China and Germany however helped to ease worries on slowing growth.
CPO April futures are consolidating in a broad range now. As mentioned in the previous update, an unexpected decline below 3,065 Malaysian ringgit (MYR) a tonne could turn the picture weak once again.
Such a fall could take prices lower again towards 2,965-70 MYR/tonne, from where prices can bounce higher again. This is our favoured view now. Near-term support is seen at 3,015 MYR/tonne. While resistances at 3,135-45 MYR/tonne caps upside attempts, we can expect prices to ease lower to above mentioned levels.
Only a direct rise above 3,175 MYR/tonne could change the picture to bullish again reviving hopes of a test of 3,350 MYR/tonne in the coming months. 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 3,465 MYR/tonne. A wave “C” kind of a decline ended at 2,755 MYR/tonne itself. A possible new impulse has begun now with immediate targets in the 3,350-65 MYR/tonne range. RSI is in the neutral zone now indicating that it is neither overbought nor oversold.
The averages in MACD have gone below the zero line of the indicator indicating a bearish reversal. Only a cross-over again above the zero line again could hint at resumption in up trend.
Therefore, look for palm oil futures to test the resistances and then fall lower subsequently.
Supports are at MYR 3,045, 3,010 and 2,975. Resistances are at MYR 3145, 3,185 and 3275.
(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 .)