CPO Rises Against Higher Productions and Lower Exports Data

CPO Moves Higher Against Headwinds
Malaysian palm oil futures ended higher on Friday helped by strength in external markets. This was despite a very weak data from the official Malaysian Palm Oil Board. Strength from the corn futures rubbed-off on all agricultural commodities. Official data on stocks and exports paint a bearish fundamental picture.
End-August CPO inventories rose to 1.72 million tonnes from 1.41 million tonnes in July, data from the government-linked Malaysian Palm Oil Board showed. August output rose 5.7 per cent to 1.61 million tonnes even as exports declined 18 per cent to 1.21 million tonnes. CPO futures have been moving in line with our expectations.

As mentioned in the previous articles, we expected a fall towards 2,585 Malaysian ringgit (MYR) a tonne. CPO futures can be in a choppy range now with good resistance near the 2,745 > 2,785 MYR/ton zone and good supports near 2,550 > 2,600 MYR/tonne zone or even lower to 2,525 MYR/tonne in the coming sessions.

A direct rise above 2,750 MYR/tonne on the other hand would signify that the market has ignored all the negative factors. Such a rise could then target the next important resistance at 2,865 MYR/tonne.
Looking at the soybean oil charts, we believe there could be more upside and a sustained uptrend there. If the bullishness in the soya complex rubs off on CPO, it is unlikely that CPO futures could go down lower despite weak fundamentals. In the big picture bullishness for 2,865 MYR/tonne is still intact as long as 2,500 MYR/tonne remains undisturbed.

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.
The fresh impulse move, which we have been anticipating towards 3,000-3,200 MYR/tonne can again be expected. This view gains momentum only on a close above 2,865 > 2.870 MYR/tonne.

RSI is slightly above the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator indicating the beginning of a strong bullish trend. Only a cross-over below the zero line again could indicate bearishness again. Therefore, look for palm oil futures to consolidate and then rise higher.

Supports are at MYR 2620, 2585 and 2,550.

Resistances are at MYR 2,700, 2745 and 2,785
HAPPY TRADING FOLKS