MARKET RECAP
The base metals complex on the LME ended in the positive territory on Tuesday. Zinc was the only metal that declined and ended in the red. Forecasts about lower demand from the ILZSG (International Lead and Zinc Study Group) made markets bearish for zinc from the long-term perspective. Though base metals gained yesterday on the back of a short-covering rally, they ran out of steam as the bounce was temporary. Positive moves by global policy makers have also helped to create a bounce back from multi-year lows.
Copper prices touched a high of $5,510 yesterday despite a whopping rise in inventories by 2,475 tonnes. Since the red metal had touched a major low last week, prices looked attractive amid positive news. Aluminum prices also ended in the green despite a fall in crude oil prices as overall sentiments for base metals was strong as they were available at attractive price levels. Only Zinc ended in the red as demand forecasts have been downgraded.
On the macroeconomic front, the US Dollar was still trading higher but this factor could not cap yesterday’s gain in prices as it was a technically led rally.
OUTLOOK
Copper prices have managed to find support at $5,000 levels and the markets seem to have accepted this. Since yesterday’s move in prices was technically led, prices could feel the pressure but are expected to remain above the psychological $5,000 level mark. Aluminum prices did not react to yesterday’s decline in crude oil prices but the metal could face pressure if the oil price decline continues. However, it has been able to trade above a major support level of $2,200. We expect Zinc and Lead prices to remain under pressure as demand and production forecasts have been downgraded as these markets are expected to be in surplus in FY2009.
A steep decline in any of the base metals could invite production cutbacks by miners and producers and this factor could provide a support to ailing metals.
On the macroeconomic front, the US is expected to announce a host of economic data today. Majority of the data is expected to come on the weaker side and this could weaken the US Dollar movement. If the US Dollar weakens then it could provide a boost to base metal prices as a weaker dollar makes base metals look attractive for holders of other currencies. We are of this view as base metals have been reacting more to the currency factor.
Copper
Immediate support is seen at Rs.249.10 levels for MCX November contract. Further below, support is seen at 245 levels. Copper is expected to trade sideways.
Whereas resistance is seen at Rs.256.90 levels & further upwards at Rs. 260.50.
Zinc
Immediate support is seen at Rs.67.10 levels for MCX Oct contract whereas crucial support is seen at Rs.66.05 levels. Zinc is expected to trade lower for the day.
Short-term resistance is seen at Rs 69.10 whereas major resistance is seen at Rs 71.50.
Zinc prices are currently trading around 93 levels. Immediate support is seen at Rs 92.30 levels for MCX Feb contract whereas crucial support is seen 90.60 levels.
Short-term resistance is seen at Rs95.40 whereas major resistance is seen at Rs97.
Courtesy: Angel Commodities
