FCPO Prices Plunge: Analyzing the Impact of Currency and Competition

Over the past two weeks, FCPO (Crude Palm Oil Futures) has seen a sharp decline of around 7%, raising concerns among traders and investors alike. However, based on my analysis using the Daily Chart zone, I believe FCPO is still trading within the range of its lowest or cheapest price levels. This presents a compelling opportunity for those, like myself, who employ a buy-and-hold strategy.

The recent drop in FCPO prices can be attributed to a combination of factors. While the weak price of soybean oil plays a significant role, it's not the only driver. The decline of the US dollar against the Malaysian ringgit has also contributed to the downward pressure. Given that FCPO prices are extremely sensitive to currency fluctuations and market competition, this is a crucial factor to consider.

Our FCPO market is in direct competition with other vegetable oils, such as soybean oil and sunflower oil, which are major players in the global market. Additionally, Indonesian FCPO producers, who often operate with different cost structures and pricing strategies, add another layer of competition. In this highly competitive landscape, any appreciation of the ringgit against the US dollar could further erode the price competitiveness of our FCPO, leading to potential price declines.

Despite these challenges, I remain convinced that FCPO is currently undervalued. The recent price levels, in my view, represent a buying opportunity, especially for those who can withstand short-term volatility. While I'm fully aware that the market could face additional pressure if the ringgit strengthens further or if there are other unfavorable market developments, I am confident in the long-term value of FCPO at these levels.

To protect against potential downside risks, I've set a stop-loss below 3,200. This stop-loss level allows me to manage my risk while maintaining my conviction that the current FCPO price is a bargain. My strategy is to hold my long positions, trusting that the market will eventually goes above 3800.

In summary, while the FCPO market is currently facing headwinds, I believe this is a temporary situation. The combination of competitive pricing pressures, currency fluctuations, and global market dynamics presents challenges, but also opportunities. For those with a buy-and-hold strategy, now may be an opportune time to enter the market, with appropriate risk management in place.