Steady CPO Poised To Test Resistance

Malaysian palm oil futures ended firmer Monday on expectations of higher demand and support from external markets. A weaker dollar boosted all commodities across the board. Soya oil futures rose to a new two-year high on good export sales and a possible flood threat in Minnesota, one of the largest growing regions.
Crude oil rose the most in two weeks as the dollar dropped against the euro, bolstering the appeal of commodities. This was despite a "not so rosy" data from the official MPOB in the previous week. Threat of higher production and a possibility of an increase in export tax in Indonesia could continue to cap gains.

CPO futures have been moving perfectly in line with our expectations. As mentioned in the previous update, a direct rise above 2,685 Malaysian ringgit (MYR) a tonne has clearly indicated that the market has ignored all the negative factors. Such a move could now be targeting the next important resistance at 2,865 MYR/tonne. Near-term resistance is at 2,755 MYR/tonne followed by 2,800 MYR/tonne now.


Looking at the soya complex, 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. Some volatility could be seen in the coming weeks with important supports at 2,695 followed by 2,655.
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 could be in progress.

This view gains momentum only on a close above 2,865-70 MYR/tonne. RSI is in the 64.3 [neutral / bullish] 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 test the resistance levels.

At 6.00pm Monday the benchmark December contract ended MYR2 higher at MYR2,737 a metric ton after trading in a narrow MYR2,718-MYR2,752/ton range. Choppy trade emerged during the afternoon session, with some investors taking the opportunity to cover some positions. Some investors also liquidated positions ahead of Thursday's export data by independent surveyors.
Supports are at MYR 2,695, 2655 and 2,575. Resistances are at MYR 2,755, 2,800 and 2,865.

HAPPY TRADING