Base metals managed to end in the green despite a stronger dollar as the rally in gold prices raised sentiments. Though a stronger dollar and softer equities exerted downside pressure but metals managed to trade above their lows as the rally in gold prices pulled prices higher.
Prices of base metals are trading higher but caution still remains in the air over the interest rate decision of the US. The US Federal Reserve may not raise interest rates in this meeting as the economy has just reported positive economic growth. But we expect the US Fed to give indication of slow down in stimulus measures in the coming months. This could also mean an interest rates hike in the coming months, which could boost the dollar index.
Even in the current scenario we feel that the dollar could trade with a positive bias as expectations of a rise in interest rates in the coming months coupled with risk aversion could provide upside support.
On the macroeconomic front, the Dollar Index strengthened on Tuesday and managed to hold on to gains despite the strong rally in gold prices. The weaker dollar in the last few weeks was the main reason behind the rally in gold prices but we do not expect high gold prices to put pressure on the dollar. The dollar is gaining mainly on the back of risk aversion and the rise in gold prices is backed by central bank demand globally.
The US Federal Reserve is expected to maintain interest rates at historically low levels but may now provide an indication on how it plans to exit from the stimulus efforts. This could boost the dollar further.
In the near-term, we expect base metal prices to trade with a positive bias as positive economic data coupled supply issues in the case of some metals will help aid the upside. But a sharp upside in prices will be limited as a stronger dollar could exert pressure. But despite a stronger dollar metal prices could manage to rise as prospects of demand in the case of some metals has improved.
On the macroeconomic front - With expectations of no change in the interest rate scenario we believe that the dollar could again come under pressure after the US Federal Reserve announces the decision. But hopes of rise in interest rates in the next few months would turn into a short-term uptrend for the dollar, though the near-term looks bearish.
Copper
Copper prices are sideways with immediate support for MCX November contract seen at Rs.306.95. Further below, crucial support is seen at 304.70 levels.
Whereas resistance is seen at Rs.313.75 levels & further upwards at Rs. 315.60 levels.
Zinc
Zinc prices are sideways with immediate support seen at Rs.102.30 levels for MCX October contract whereas crucial support is seen at Rs.100.30 level. Short-term resistance is seen at Rs.104.65 whereas major resistance is seen at Rs 105.20 levels.
Courtesy: Angel Commodities Get Trading Tips on Agri Commodities
