• FCPO rallied 3.2% wow to RM2503, ahead of the Mar MPOB report on 10 Apr. A confluence of negative headwinds saw FCPO plunged 11% from YTD high of RM2641 (9 Jan) to a low of RM2350 (12 Mar) before staging a 6.5% relief rally to end at RM2503 last Friday, ahead of the Mar MPOB report on 10 Apr.
• Last Friday, FCPO jumped RM35 to 2503 and ended the week higher by RM78 or 3.2% in anticipation of lower inventories in March amid higher exports ahead of the Ramadan coupled with the extension of export duty suspension for CPO to end Apr. The rally was also contributed by strengthening related edible oils and boosted by news of China’s increase in tariffs by up to 25% on 128 US products including soybeans.
• Poised for a bullish downtrend line breakout. Following the strong weekly gains and decisive breakout above crucial 200w SMA near RM2473, FCPO is expected to break immediate downtrend line resistance near RM2513. A successful breakout will lift prices higher towards RM2530 (61.8% FR), 2573 (76.4% FR) and 2594 (200d SMA) levels. Nevertheless, further rebound could be capped as sentiment remains cautious due to seasonal production recovery from April onwards and coupled with strengthening RM (vs US$).
• On the flip side, a breakdown below RM2473 will trigger further retracement towards RM2451 (30d SMA), 2435 (20d SMA) and 2424 (uptrend line support) levels.

Source: Hong Leong Investment Bank Research - 9 Apr 2018