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The price of crude palm oil futures (FCPO) in Bursa Malaysia is still trading sideways in a range between RM2,950 and RM3,080 per metric ton for the past one month. The December futures contract price closed near the range high at RM3,078 on September 16 shows that the market was somehow bullish, which is almost the same level a month ago. It is currently near the resistance level of RM3,100. Stronger US Dollar and lower inventories and production contributed to the price increase. Trading volume for FCPO in Bursa Malaysia continues to decline. Daily trading volume average for the past one month was 10,800 contracts as compared to 12,400 contracts in the previous month.

Malaysia’s crude palm oil (CPO) output declined 4.8% in August as compared to the month of July to 1.67 million tons according to the Malaysian Palm Oil Board (MPOB). In the report, MPOB also stated that palm oil stocks for end-August stands at 1.88 million tons, down 5.6% as compared to the previous month. Palm oil exports fell 2.7% to 1.69 million tons. However, latest data shows disappointing export figures because lower global economic uncertainty which cuts demand. According to cargo surveyor SGS (Malaysia) Berhad, palm oil exports estimates for 1 – 15 September fell 31% from a month earlier and another surveyor, Intertek Agri Services estimated a 32% decline.

Price of Soybean has declined for the past one month about 7% since the beginning of this month due to stronger US dollar and lower demand. However, the spread between soybean and crude palm oil has slightly narrowed because of the decline in soybean oil. Price of soybean is near the same level year-to-date while price of crude palm oil is down 20%. The Us dollar gained more than 4% in a month against the Malaysian Ringgit. The Malaysian Ringgit is currently quoted at RM3.11 against a US dollar as compared to RM2.98 a month before.

The price trend for FCPO is still technically in a down trend as the short to long term moving averages continue to decline but the price action for the past one month shows a possible trend reversal taking place. The price of FCPO has tested the short and medium term 30 and 60-day moving averages resistance level for the past one month and is currently above these averages. However, it is still below the longer term 90-day moving average which is now at RM3,140. FCPO price is still below the Ichimoku Cloud but the thinning of the cloud moving forward indicates that resistance is expected to be weak.

Bullish momentum indicators have been building up in the past one month. MACD has crossed above its slow MACD trigger line and is climbing nearer to its middle level. The RSI indicator is forming a bullish convergence with the price trend and is currently at its highest level in three months. The Momentum oscillator is also in a bullish convergence with the price trend and is slightly above its middle level. The Bollinger bands indicator shows that the price is still in a correction but the price is now trading near the upper band and this also shows a bullish momentum building up.

Technically, price is going to reverse its down trend because of building up bullish momentum. The reversal can only be confirmed further once the price breaks above its resistance level at RM3,100. We are going to expect a rally of this level is broken. Supply of palm oil is expected to decline in this last quarter and the price of FCPO is going to depend on the demand and US dollar. However, with the disappointing export estimates from the cargo surveyors, we are probably going to expect an immediate pullback in price and price being supported at RM3,000.