Malaysian palm oil futures on Bursa Malaysia Derivatives Exchange eased on Friday, posting their fourth straight weekly gain, as a weaker ringgit continued to underpin prices. Gains were capped by market participant's caution ahead of the September 1-10 export numbers and official August stocks data from the Malaysian Palm Oil Board due on Tuesday. An increase in output and stocks is widely expected. It remains to be seen if exports can compensate for the rise in production and stocks with the festival demand setting in the coming months in the largest consumer India. .

A US Department of Agriculture report that showed the dry weather damage to US soya crop was not worse than expected resulting in profit-taking.

CPO active month futures are moving in line with our expectations. As mentioned in the previous update, looking at the bigger picture, there is a good chance that this move could potentially turn into a strong one targeting 2,500 Malaysia ringgit (MYR) a tonne levels too, provided it takes out 2,425 MYR/t easily. A break of 2,425 MYR/t has seen prices testing 2,461 MYR/t so far. As anticipated, the gap near 2385 MYR/t was tested before the uptrend resumed. Currently, strong support is seen at 2,420 MYR/t followed by 2,375-80 MYR/t levels. While these support levels hold, a shot at 2,500 MYR/t or even higher to 2,595 MYR/t looks more likely. Only an unexpected fall below 2,345 MYR/t could revive bearish hopes again which we do not favour presently.

The wave counts need to reviewed once again. Fine tuning of counts is necessary to get the bigger picture forecasts clear. The present decline has met an intermediate wave target at 2,135 MYR/t and the subsequent impulse characteristics of the present move makes us believe that it could exhaust near 2,500 MYR/t levels and then a subsequent decline to 2,345-50 MYR/t levels. It looks like the anticipated decline materialised. Further to this decline a sharp third wave move looks likely for 2,575-2,600 MYR/t in the coming months. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal. Only a crossover below the zero line again could hint at bearishness again.

Therefore, look for palm oil futures to test the resistance levels.

Supports are at MYR 2420, 2385 and 2345. Resistances are at MYR 2485, 2520 and 2575.