Palm oil may test resistance
22.05.12
Palm oil futures on the Bursa Malaysia Derivatives Exchange ended higher on Friday due to concerns that heavy rainfall in growing areas of Malaysia could cause supply disruption. This was despite a weakening euro, which normally dents sentiment in commodities. Production in Malaysia is in the seasonally low-yield phase and heavy rains that threaten to disrupt production may add pressure to tightening stocks. US data on Thursday pointed to positive trends for the world's biggest economy and helped allay concerns on slowing growth. Energy prices were supported by signs of an improving US economy and Iran's threats to halt oil flow through a vital trade route.
Crude palm oil (CPO) futures are moving perfectly in line with our expectations. As mentioned in the previous update, hopes of a retest of the recent highs look likely, taking prices higher back into the MYR3,100-a-tonne zone or even higher to MYR3,185-3,200 a tonne, followed by MYR3,215-3,225 a tonne levels. Besides, the indicators have turned bullish again. A break above key trend line resistance at MYR3,199-3,200 a tonne could drive prices higher towards MYR3,275 a tonne initially and subsequently towards MYR3,350 a tonne levels in the coming sessions. A fall below MYR3,135 could postpone the bullishness and prices could correct even lower towards MYR3,115 a tonne levels.
Source: Hindu Business Line