Base Metals

Good Buying Seen After Yesterday’s Sell Off

Yesterday Goods Trade Balance and New Home Sales came in at -64.81 B and -08 % against previous expectations of -65.50 B and -1.0 %. The healthy numbers reported did bring selling in Gold but later on Gold held well as Trump reiterated that He may be compelled to take harsh measures against North Korea if they continue their Brash ways. Trump has also threatened to negate a pact with South Korea on trades as he continues his protectionist policies. USD and Equity markets have remained range bound despite some good bit of selling in the base metal pack, with aluminum being the biggest loser. In the morning Japan announced their Housing starts which beat market expectations signifying expansion and consumer demand improving in the far east. However their Industrial Production fell to -2.1 % against expectations of just -0.8 %fall. In a recent Poll survey German Chancellor Angela Merkel has extended her lead in polls to be held in September. This has improved the risk sentiment in the European region. Iron ore and re bar have both performed appreciably in Today’s trade with both rising 2 % in morning trades. Freight rates have continued their decline today and are down 1.15 % at the time of writing. World Bank has increased it’s forecast for Base metals this year to 16 % against it’s earlier estimate of 11 % reiterated in January .China has reported that some banks have reduced or suspended giving loans to property developers as they feel that property market is over heated and defaults can rise in the near future.

Zinc recovered slowly after being sold off in the evening session. Prices have touched 2645 before retracing and this will mark an important level which need to be closely watched. According to IZSG zinc will be in a deficit of 226000 tonnes this year as demand may slow going down the line as compared to last year but supply side issues will persist in the counter. There has been reports surfacing that a large Peru zinc smelter is facing the prospects of closure as workers plan an indefinite strike from 06 May. If done than it could tighten the metal’s supply significantly in the short run and could be bullish for the counter. Spreads have seen better bid positions with inventory being very supportive of the counter.

Resistance 1 – 2659 ( recent high from which it hit 2517 again )
Resistance 2 – 2692 ( basis 10 April ’17 high )
Support 1 – 2621.5 ( basis 09 June ’17 low )
Support 2 – 2607 ( basis 21 Nov’16 high )

Lead has shown very good strength with buyers aggression seen in the counter. Backwardation increases in length abnormally though we will watch this after this month’s clearing . Meanwhile ILSG in it’s latest report have stated that the metal will be balanced this year with production meeting consumption and they do not expect deficit in 2017. Inventory has been declining . Closing has been good technically with 2200 taken out on closing basis.

Support 1 – 2205 ( will act as a short term support in the counter )
Resistance 1 – 2250 ( will act as very stiff resistance in the counter )
Support 2 – 2190 ( this level will now become strong support for the counter )
Resistance 2 – 2269.5 ( basis 03 April’17 low )

Aluminium saw a major fall yesterday with strong seller’s aggression seen in the counter. Technically the counter has done lot of damage yesterday and it will take a Herculean effort for the counter to rise after such a poor price action. China has been exporting this material at record levels despite environmental shut down’s as data suggests. Inventory has been on a declining trend .Spreads were on the offered side. Open interest has seen sharp decline indicative of profit booking ?

Support 1 – 1915 ( basis 27 March ’17 low )
Resistance 1 – 1936 ( basis 04 April’17 low and strong divergence seen from here )
Support 2 – 1900 ( will act as important level on the downside )
Resistance 2 – 1948.5 ( basis 28 March’17 low )

Nickel for a change has seen good positive action with buyer’s being the aggressors. Technically a good close considering the market breath. There has been strong buying evident in the markets at lower levels . On the wires has been a report that Philippines new environmental secretary has been on a closing spree of mines considered dangerous for the environment and the miners hope of a understanding Government after the change in guard has been crushed. Inventory has seen declines.

Support 1 – 9450 ( basis 29 June’17 high )
Resistance 1 – 9555 ( basis 25 June’17 low and first area of resistance )
Support 2 – 9350 ( this will act as strong support for the counter )
Resistance 2 – 9655 ( will act as stiff resistance in the short run )

Copper has been well bid with prices remaining strong though there was selling seen in the counter in the evening session but prices swiftly covered from it’s lows. Copper has failed to maintain above the 2.600 level in Comex and this makes me wry in the short run . We need to be careful if it fails to hold above this level . Spreads have seen two way action. Inventory has been positive with continuous declines seen in the metal.

Support 1 – 5700 ( this level remains strong support area for the counter )
Resistance 1 – 5731 ( basis 04 April ’17 low and divergence seen )
Support 2 – 5675.5 ( basis 19 April’17 low )
Resistance 2 – 5755 ( basis 03 Feb’17 low and congested zone )

Tin has been positive with buyers supporting the metal at lower level. Volumes are low with a positive price action. Backwardation persists in the counter with inventory positive A close above 20000 will bode well for the counter in the medium term.

Support 1 – 19780 ( basis 24 April ’17 high and good support )
Resistance 1 – 20000 ( technically very important resistance )
Support 2 – 19700 ( basis 15 March’17 low )
Resistance 2 – 20100 ( basis 12 April’17 high )

On the macro economic indicator German Retail Sales came in at 0.1 % against forecast of -0.3 %.There has been a slew of data from the European region with most of them beating expectations and indicating a healthy picture for the Euro zone in the medium term. However Britain GDP numbers were lower than expectations. Later in the day in US we have Employment Cost Index, Michigan Inflation and Consumer Expectations Sentiments and Current Expectations. We will be closely looking at the GDP numbers due Today and that can Guide us about the timing of the interest rate rise. Today as the month end’s we could see volumes and volatility rise.

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