September 13, 2022 05:27 GMT
Spot MYR/IDR trades at IDR3,298 at typing, a touch higher on the day, edging away from three-month lows printed on Monday as attention is drawn to the competition between the top two palm oil producers for export markets.
- Data from Malaysia Palm Oil Board showed that stockpiles in the second largest producer of the tropical oil were largest in nearly three years in August as shipments struggled to catch up with production growth. Malaysia's ability to sell its crude palm oil abroad has been limited by Indonesia's efforts to boost shipments and drain its own overflowing storage tanks. The two top producers are fighting for market share at the peak of high production season that stretches from Jul to Oct.
- The supply glut facilitated an almost 50% pullback in palm oil prices from their April highs. The most active contract traded in Kuala Lumpur printed fresh cyclical lows last week, before recovering over the past few days. The contract for November delivery kept advancing today to last trade at MYR3,820/MT amid hopes that the tropical oil's relative cheapness will lure more buyers.
- The competition for palm oil market share remains in focus as revenue from sales of edible oil shipments played an important role in allowing regional governments to fund generous subsidy schemes used to keep inflation in check and buy some time for central bankers. Bank Indonesia was the last dovish holdout in emerging Asia, only lifting its key interest rate off record lows last month.
- Despite today's uptick, MYR/IDR remains on a clear downtrend, having tested the water below Aug 12 low of IDR3,300 as it printed fresh multi-month lows at IDR3,292 on Monday. Renewed losses past Jun 7 two-year low of IDR3,284 would confirm that bearish momentum remains strong, turning focus to Jun 10, 2020 low of IDR3,244. Bulls need a rebound above Sep 5 high of IDR3,327 to get some initial reprieve.
- Worth keeping an eye on moving averages as the 50-DMA is approaching the descending 100-DMA. A potential crossover would send a bearish signal. The RSI is yet to enter overbought territory, suggesting that there is more scope for deeper losses.