Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:
The dollar has climbed to 16 months high as investors built bets on a Federal Reserve interest rate increase next month and political risks in Europe which put pressure on the euro and the pound. Rupee meanwhile is getting stronger on back of weak crude oil prices. Indian Rupee has support around 72 and if it breaks that level, we can expect USDINR to appreciate till 71.60 levels. Crude is a major factor for strong rupee. The rupee is expected to follow crude oil prices and if crude oil prices start appreciating, we can expect the rupee to depreciate against US Dollar. We don’t expect Rupee to sustain below 71.50 for long.
Gold price meanwhile is oscillating between $1200-$1215. strong dollar is providing headwinds for gold but gold bulls still are managing to cling on to $1200 levels. With the U.S. midterm election and the latest Federal Reserve decision out of the way, gold analysts are now switching focus to the U.S. dollar and global macro data releases. Bearish positions in gold are getting trimmed if we look at CFTC data. Hedge funds and money managers continue to trim their bearish positions which is again positive for gold prices. As long as the dollar's immediate-term trend is still up, gold investors should remain on the defensive and wait before taking on significant new long positions in the yellow metal.
Crude prices took a nosedive as waivers on Iranian sanctions and rising supplies offset export-cut concerns. US crude stocks have increased for the seventh consecutive week which left US domestic crude stocks nearly 37 million barrels higher than they were in mid-September. Crude Oil is now in oversold region. We can say it’s in bearish trend as it has corrected more than 20% since high. Any bounce back is expected. In spite of bearish sentiment that the world is swimming in oil, but the data is saying something else entirely. Global floating storage is at multi-year lows. Another positive factor for crude oil prices is the premium between Brent and WTI. The premium is around a $9.80, close to the highs since 2015. A higher premium for Brent tends to be a bullish factor for the oil market. It is likely that the sanctions on Iran are keeping the premium for Brent high as it is the benchmark pricing mechanism for Middle Eastern crude oil.
Target: Rs 4,300
Stop loss: Rs 3,920
Crude oil has witnessed a sharp fall and the 3rd Elliot wave has been extended. Now we are in the midst of 4th wave, where we expect Crude oil prices to bounce till 4300. RSI_14 is also in oversold territory at 19.81 not seen since Jan 2015. Looking at the oversold region, we recommend long position with a target of 4300 and stop loss at 3920 closing basis.
Target: Rs 144
Stop loss: Rs 138
Lead has taken multiple supports around 138 and has recovered from those level. Elliot wave pattern is complete with A-B-C pattern and now we expect Lead to appreciate till 144. The conflux region of 138-137 and each time prices recovering from those level indicates bulls strong hold. Short term moving average of 13 has started turning upwards and we expect price action to close above 13 and 20 day moving average. So we recommend long position for expected target of 144 and stop loss of 138.
Disclaimer: The analyst may have positions in any or all the commodities mentioned above.