Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls.
The US Dollar Index (DXY) is trading in a bull trend above the 200-period simple moving average. DXY found support at the 50 and 100 SMA and the 97.00 figure. The level to beat for bulls is the 97.50 resistance. Indian Rupee broke 72/dollar mark at the start of the week after RBI governor’s abrupt resignation but rupee have somehow clawed back on the back of equity inflows and crash in crude oil prices. The Indian rupee has support at levels of 71.20-71.30 and if Rupee manages to sustain below that level, once again we can see rupee testing the lows of 69.70. Any further weakness in Rupee is only expected above 72.20 so as long as the rupee is trading below that level, we would recommend sell on rise.
Gold in COMEX is in a positive trend and resilient in spite of DXY getting stronger. Gold is above $1251 and trading comfortably above 200DMA. Next resistance comes at $1261. Gold is getting a boost from the inverse yield curve. We expect the value of gold to rise further due to bullish run having support from the curve inversion seen in treasury yields. This is as the spread between the 5-year and 2-year treasury yield has turned towards the downside. If spread turns negative, we would see a constant flow of funds from US Dollar to the yellow metal. The rising demand for gold call options (bullish bets) indicates that investors are expecting the yellow metal to remain better bid while heading into the year-end. Gold Speculators strongly boosted their bullish bets to the best level in 20 weeks. From a Gold/Silver Ratio perspective, silver at present looks attractive with the ratio currently standing at 86.93 all-time high. Silver Speculators are heavily net-shorts. At the current juncture, speculative short positions in silver are extremely large. Silver has broken its 1 month high of 38000 and if it manages to sustain above 38000, investors can look at silver too.
Crude oil has failed to lift in spite of production cut from OPEC by 1.2 million barrel/day. The cut was lower than expected and now OPEC has stated that they see slow in demand for crude oil in 2019 which is again putting headwinds for crude oil prices. Global equities have fallen by nearly 8 percent so far this year, battered by concern about slowing corporate earnings and an escalating U.S.-Chinese trade dispute. The stock market and oil market correlation is back. The worries about the global economy and the demand outlook that follows on that for oil are a bigger and bigger negative for the market. Brent Crude needs to break above $64 and in MCX Rs.3850 to stage fresh momentum on the upside. We expect Crude to bottom out around Rs.3500.
TARGET: Rs 3,880
STOP LOSS: Rs 3,550
Crude Oil is languishing near its support area of 3600-3500. It seems investors are content around $60 price in Brent. There is a positive divergence in RSI_14 on the daily scale in MCX. We expect Crude to test its resistance zone of 3880-3900. Any further upside conviction comes above 3900 but there is an opportunity for some short covering around here as risk reward is not favourable for any short position from here. So we recommend long position at current price with expected upmove till 3880 and stop loss of 3550.
TARGET: Rs 455
STOP LOSS: Rs 438
Copper is trading above its 200DMA on daily scale and RSI_14 has also given positive crossover. It is currently trading at 55 which confirms bullish sentiment. 13 and 20 EMA comes at 438 which would be the support for Copper and our stop loss too. We expect Copper to test above the swing high made on 2nd Nov of 452 and above. So we recommend long position with target of 455 and stop loss of 438.
Disclaimer: The analyst may have positions in any or all the commodities mentioned above.