Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:
Dollar index erased its 2 day gain and has settled lower today trading near 94.60. In spite of dollar index’s sharpest pullback after touching technical resistance mid-month at 97, Indian Rupee continues to fall against Dollar. Indian Rupee is trading at all-time low and there seems to be no respite. Spike in crude oil prices and demand for US Dollar by Indian oil importers have added extra pressure on our currency. Rising crude oil prices will push up oil import cost and will widen India’s current account deficit. We expect USDINR Sept contract Future to trade near 71.20 before we can see some pullback. Any correction should be used for buying as long as 70.50 is not breached.
Gold failed at $1,220 on Tuesday, falling $13 from that level to close at $1,207. The sell-off was no surprise, with gold reaching one of our resistance levels. With record short position, gold needed to sustain above $1200 for short covering and we saw gold shooting till $1220 before retracing back on strong US GDP numbers. Now support level for Gold again comes at $1195. If gold does break below $1195, then we can again expect underperformance from gold till $1180. The news of US-Canada resuming trade negotiations also is proving to be a headwind for gold. Gold can still rally but needs dollar index to weaken. Unfortunately, we don’t see DXY weakening right now. Gold needs to sustain above Rs.30000 in MCX to give bulls upper hand, otherwise, bears will gain upper hand below Rs. 29980 in MCX and below $1195 in COMEX.
Crude has closed positive in 10 trading session out of last 12 trading session. After taking support at its 200 day moving average, Crude oil has gained from $71.20 to $77.60. US inventories withdraw is also supporting the prices. US refiners are expected to have kept runs high, encouraged by strong refining margins, which could draw on inventories in future too. Weaker US dollar has helped in boosting the prices and there is inability among OPEC producers to increase production. The drop off in Iran exports is helping in creating supply shortage and IEA has warned that there might be supply disruptions from Venezuela where an economic crisis is affecting output. We expect Crude to test the levels of 5000-5075 on supply woes and any chance of a correction in prices will only come below 4800.
Target: Rs 970
Stop loss: Rs 920
Nickel is the only base metal that has failed to rally along with other base metals. Last week we saw all base metals rallying expect Nickel. The emergence of Bullish engulfing pattern on Tuesday along with price action sustaining above the midpoint of bullish engulfing pattern suggests we may see an increase in participation in Nickel. RSI_14 also is trading above 50 indicating buying momentum is picking up. We recommend long position with expected target till 970 and stop loss of 920.
Target: Rs 151
Stop loss: Rs 143
Last week, we anticipated a breakout in Lead and initiated buy call. This week too we recommend a long position in Lead. Lead prices have settled above its short-term moving average of 13 and 20 after 27 June. Momentum looks strong as RSI_14 is trading above 54 and Stochastic oscillator also have generated crossover buy signal. We recommend a long position in Lead with expected upmove till 151 and stop loss of 143.
Disclaimer: The analyst may have positions in any or all the commodities mentioned above.