Base metals bullish, MCX Nov copper suport 303.85

Base metals traded on a choppy note on Wednesday although a weaker dollar and gains in the commodity sector helped the metals close in the green. The FOMC statement indicated that interest rates would remain low for an extended period of time and this factor could ignite some buying further.

A rise in Gold prices provided strength as overall prices gained across the commodities space. The sentiment remains bullish as with the latest US GDP growth of 3.5% markets expect the demand scenario for base metals to improve in the coming year.

On the macroeconomic front, The Dollar Index weakened yesterday as the FOMC meet put pressure on the dollar. As expected the US Federal Reserve did not raise interest rates and maintained saying that rates would be kept at exceptionally low levels for an extended period of time.

This is bearish for the dollar and hence the index faced pressure on the downside. The Greenback traded sharply lower against European majors as well as commodity currencies while equities rose again after some retreats.

The FOMC suggested that economic activity has continued to pick up. Conditions in the financial markets remain unchanged over the period.

We expect the Dollar Index to trade with a negative bias as lower interest rates would keep a check on the rise in the dollar from the short to long-term perspective.

Base metal prices could continue to remain dominated by bulls as economic optimism, stimulus measures and expectations of a rise in demand in the coming year could boost prices. We feel that the dollar will continue to play a crucial role but the weakness in the dollar may now slow down. This would lead to time and again correction in base metal prices if the dollar strengthens.

On the macroeconomic front, the US is expected to announce economic data on unemployment claims, non-farm productivity and unit labor costs. The data is expected to come on the mixed side and may lead to volatility in prices.

Copper
Copper prices are sideways with immediate support for MCX November contract seen at Rs.303.85. Further below, crucial support is seen at 301.75 levels.
Whereas resistance is seen at Rs.311.70 levels & further upwards at Rs. 314 levels.

Zinc
Zinc prices are sideways with immediate support seen at Rs.102.10 levels for MCX October contract whereas crucial support is seen at Rs.100.30 level. Short-term resistance is seen at Rs.105.00 whereas major resistance is seen at Rs 106 levels.

Courtesy: Angel Commodities

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