Fundamental
Palm oil prices hit 2-month low, pressured by latest release of USDA report which raised estimates for soybean planted acreage and ending stocks for this year. Robust global edible oil supplies had thus pressured local tropical oil to post the biggest drop since Nov 5. Furthermore, discouraging Chinese data and weak Indian rupees added to worries over falling demand from these top buyers amid expectations for high-yield production in the second half of the year. NYMEX crude rebounded as demonstration in Cairo on Friday highlighted Egypt’s political instability which continue to threaten oil supply. Better-than-expected US second quarter earnings of financial sector had been another supportive factor to the market. US soyoil extended losses tracking sharp losses in Malaysian palm oil and on favourable weather forecasts in key growing regions which boost yield potential. Expect futures to trade lower today as prices are vulnerable to continuing weakness and investors might stay cautious ahead of export data due later today.
Technicals
CPO futures lost 71 points to settle at 2301 with substantially higher trading volume recorded for the day. Prices opened lower and had been trading with downward bias throughout the day. The strong sell-off in last trading hour pushed prices to break major support levels, triggering massive stop loss for long position and bringing prices to as low as 2295. The downside movement in prices had created a long black candle which also indicates a wide trading range for the day. The break below support levels and moving averages coupled with bearish MACD indicators lead to a bearish outlookfor the coming session. As such support and resistance can be pegged at 2265 and 2325 respectively.
Strategy
Trade may short with a stop on or above 2325.
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