Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:
US stocks saw the worst fall in nearly eight months which spooked every asset class including currency market. Usually, US Dollar is seen as a safe haven but yesterday we saw US dollar falling below 95 levels. The safe-haven yen strengthened to 112.13 against the dollar, its highest level this month, taking heart from risk aversion in the wake of warnings from the IMF over global growth and financial stability. 10 yr US Treasury yield has cooled from 3.261 which was 7 year high to 3.15. We are seeing heavy intervention by RBI in the forex market so 74.60-74.70 continues to face heavy resistance. Short term target for USDINR comes to 75.20 but we may see rupee getting a pullback to sub 74 before resuming its upward journey.
Gold prices are hovering around $1195 and continue to remain range bound inspite of rising interest rate scenario. The upside is limited as higher 10 yr US Treasury yields make gold unattractive but record short speculative position makes it vulnerable to massive short covering. People are preferring U.S. Treasury bonds as they are more attractive in the current environment over gold, despite the sell-off in equities. Gold seems to have temporarily bottomed out near $1182 and if gold manages to go above $1205, we may see a further rally till $1218-$1220. In MCX, 31200 seem to be key support area and any long position can be held with a stop loss of 31200. Rs.31600-31800 is the resistance and we advocate buy on dips view as long as 31200 is not breached closing basis.
Crude oil saw much-needed correction after API reported major build of 9.75 million barrels of United States crude oil inventories for the week ending October 5. Not just inventory build but risk-off scenario seeing in equity assets also helped in traders booking profit and unwinding their long position. The fall was also on the back of easing in supply worries as Hurricane Michael likely spared oil assets from significant damage as it smashed into Florida. We only expect crude oil to significantly correct if Brent trades below $80. Till then it can be considered as just pullback and chances of Brent hitting above $85 still stands high.
Buy Crude Oil
Stop loss: 5,300
Crude Oil has retraced and taken support at 61.8% retracement taken from high of 5669 and low of 4842. The primary trend remains positive as price action has taken support on a daily scale at 20-day moving average. There are no divergences seen in any oscillator so unless any divergence emerges, we continue to advocate investors to trade in its primary trend which is bullish. We recommend creating a long position with the target of 5550 and stop loss of 5300 closing basis.
Stop loss: 31,200
Gold chart is bullish in MCX thanks to weak Indian Rupee. RSI_14 is trading above 60 levels which are positive and ADX confirms the same trend. Long bullish candle after a couple of small candlestick again confirms the bullish trend as sideways consolidation looks over and gold is now ripe for further upside movement. In Comex too we are bullish as gold bulls have defended levels of $1182 in spite of rising 10 Yr US bond yield and the strong dollar. We recommend a long position near 31400 with the target of 31700 and stop loss of 31200 closing basis.