MCX
+3.93
NCDEX
+15.67
MARKET ANALYSIS
The base metals pack witnessed sharp selling during the later half of yesterday’s trading session as a wave of selling was witnessed across the board for all major international commodities, including bullion and crude. It appears that profit booking at higher levels along with the month coming to a close, is weighing on prices. Participants may now be gearing up for a jumpy session today - the end of the week and the month, as well as the long Labour Day holiday weekend in the US.
Lead prices yesterday briefly breached the $2100 mark but were unable to close above it. The prior day, prices had gained a whopping 11% yesterday as falling LME inventories provided major support. Although lead inventories rose 125 tonnes from 2-1/2 month lows, cancelled warrants - the metal pre-booked for removal and therefore not available - increased by 29 percent to 12,850 tonnes, pointing to further drawdowns to come, which woud be supportive for lead prices. Chinese downstream consumers are more positive towards lead than zinc and hence found a great opportunity to buy at lower levels since the metal had declined sharply. Overall, the base metals pack ended in the negative territory. Recently base metals have been reacting to currency and crude oil price movement.
On the macroeconomic front, yesterday’s US data tended to stymie the metals complex. Weekly US jobless claims came in at 425,000, against an expected 427,000 a number above 400,000 is negative. Meanwhile, the second quarter GDP 'flash' was better than hoped at growth of 3.3 percent, against a forecast 2.6 percent.
OUTLOOK
Lead prices could trade higher in the coming months as strong imports of lead into China are expected to continue in the fourth quarter on the back of growing demand for lead-acid batteries. Depressed exports of the metal will provide support to the metal at higher levels. Copper prices are trading higher on expectations of increased buying from China post the Olympics as industrial activity is expected to re-start. This factor is providing major support to copper in times of rising inventories and overall slowdown in demand. Also, copper prices appear to be strongly supported around $7000 - $7100 levels.
Base metals over the current week have traded range-bound except lead. Prices are currently reacting to the currency and the oil market. It has been seen that a rise in crude oil prices pushed the base metals higher as it boosts sentiments overall. Whereas, a decline in oil prices pulls the metals lower. This is because rising crude oil prices depress the dollar movement and hence make base metals look attractive, while falling crude oil prices boost the dollar and make base metals look expensive for holders of other currencies.
On the macroeconomic front, the US Personal Income/Spending along with Chicago PMI & Michigan Sentiments data is to be released this evening. We expect today’s trade in base metals to remain volatile on account of today being the last day of the month & contract expiry for base metals.
TECHNICAL ANALYSIS
Copper
LME copper prices are expected to trade sideways down. Prices on LME shall find strong support at $7510/7445 & resistance at $7590/7660.
MCX Aug contract shall find immediate support at Rs.327.30 level. Further above, resistance is seen at 323.70 levels. Whereas resistance is seen at Rs336.30. levels & further below at 341.50.
Zinc
Zinc prices are looking sideways, with prices likely to find strong support at $1780-1750 levels and resistance is seen at $1830-1860 on LME.
Immediate support is seen at Rs.76.90 levels for MCX Aug contract whereas crucial support is seen Rs.75.40 levels. Short-term resistance is seen at Rs.79.50 whereas major resistance is seen at Rs.81.10.
Courtesy: Angel Commodities
