Weak Chinese Yuan has set the stage for Indian rupee to depreciate till 72.50-72.80. Chinese Yuan is trading at 10 year-low and the Indian market is also witnessing correction which is making rupee vulnerable. Any dips can be bought till 71.40 is not breached on the downside. With trade war spilling into currency war, we don’t expect a Chinese Yuan to come below 7.07. So, expect the rupee to depreciate further from here.
Gold speculators pushed their bullish bets to the highest level since 2016 and to just under the +300,000 contract level. Gold is trading near $1,545 and at the end of the year we could see gold touching $1,620. High gold prices are here to stay as trade war between the US and China and falling interest rates around the world should continue to push the price of the yellow metal higher.
Central bank buying continues to underpin the gold market as China and Russia have been absorbing all domestic production for years. Russia purchased 300K ounces of gold from international market in July. Any pullback in the gold price in the coming days should be short-lived and relatively shallow. There are simply too many uncertainties facing the US and global economy right now to justify investors liquidating their safe-haven holdings in the metal.
The yield curve between US two-year and 10-year has widened, signaling red flashing signs that recession may come in 12 to 18 months. Silver continues to outperform gold and we may see silver touching $19 soon. Preference should be given to silver for taking long positions as Gold/Silver ratio is expected to touch 80 from current 84.
Finally, the WTI crude oil speculators sharply raised their bullish bets for a second week. Crude oil is trading above Rs 4,000 and is expected to test levels till Rs 4,100. It is expected to trade in range of 57-64, so avoid getting bearish on dips and bullish on rallies. Concerns about global growth amid the raging trade war between the United States and China are likely to cap gains. Natural gas inventories are growing at an increasing rate and doesn't look to change anytime soon. Demand for natural gas is still strong, but a mild winter or weakening economy would cause inventories to swell even further. The only positive for Natural Gas is that prices are at bottom end of 25-year range. So, we might see some upside but don’t expect too much of rise.
Target: Rs 157
Stop loss: Rs 152
Lead has been trading in range of Rs 152 - Rs 157 since July. At present, it is trading at the lower end of the range, so we expect according to chart pattern that Lead will try to test levels of Rs 157 which is the upper end of the range. Base metals have been resilient even after China putting tariffs on US goods indicating negative news have been discounted. RSI_14 is trading steady at 50 indicating neutral trend. Short term trading opportunity arises from range bound movement and so we recommend long with a target of Rs 157 and a stop loss of Rs 152.
Target: Rs 453
Stop loss Rs 438
On the daily scale, RSI_14 signal line has given buy signal and it is trading above 50 indicating a resumption of the bullish trend. Short-term moving average of 13 and 20 has also given cross over which is another confirmation of buy signal. Yesterday, copper made bullish belt hold candlestick pattern and today prices are trading up which again reiterates our view that copper is expected to test levels of Rs 453 in near term. So, buy with a stop loss of Rs 438 and expected upmove till Rs 453.
Disclaimer: The analyst may have positions in any or all the commodities mentioned above.