Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls.
Dollar index after bottoming out in the proximity of 95.80 has bounced to 96.20. The bounce came despite a persistent decline in yields of the key US 10-year note to fresh 8-month lows in the 2.65%. Last week DXY extended loss on partial US shutdown and with shutdown ending not coming in sight. Meanwhile, the Indian rupee has breached 70/dollar level but feeling top heavy near 70.60. We expect the rupee to depreciate more as fall in equity market will be accompanied with FIIs outflow which will accelerate rupee’s fall. We expect INR to bottom out around 70 levels and test levels of 70.80 in near future.
Gold has hit fresh six months high on stock market volatility and growth fears. Every country PMI has started shrinking which is questioning growth rate and so gold is getting benefit from these. A weaker dollar is also lending support and gold has given breakout in COMEX after breaching and sustaining above $1275. Next resistance comes at $1300 and $1320 and only below $1265 do we see gold rally getting fizzed out. In MCX, gold has support at 31300 and resistance at 32000. We expect gold to retrace till 31600 and from there long position can be added with the stop loss of 31300. Silver also has joined gold rally which makes gold rally more authentic. Previously gold rally accompanied by a sideways trend in silver did not augur well for gold. Historically gold rally is always accompanied by silver rally which we are seeing this time.
Crude oil is showing signs of bottoming out process. Yesterday oil prices surged more than 4 percent as Saudi Arabia has started cutting their production. OPEC+ cuts will be applicable from January and so we may see production cut figures coming in February. China’s slowdown will be headwinds for crude oil prices as demand will decrease. While U.S. production hit a record for a fifth straight month, growth slowed considerably from September due to pipeline bottlenecks in the Permian basin region and Gulf of Mexico outages. We expect crude oil to bottom out around 3000 in MCX.
Target: Rs 142
Stoploss: Rs 135
Lead is one of the base metals that have outperformed other base metals. Partly the reason is the jump in canceled warrant which indicates producers expect price to gain in near future. Lead has made ‘harami’ candlestick format which indicates the recent fall might get arrested. Lead has taken support around 136 levels were previously too, lead has bounced from these levels. We expect Lead to appreciate from here so long position is recommended with stop loss of 135 and target of 142.
Target: Rs 792
Stoploss: Rs 735
Nickel has failed to breach 735 levels 5 times since last 7 trading session which shows the important support level. Nickel has made ‘bullish engulfing’ candlestick pattern at the swing low and now has jumped to 753. We expect the momentum to continue till 795 where its next resistance is. So we would recommend long at current market price with stop loss of 735 and target of 792.
Disclaimer: The analyst may have positions in any or all the commodities mentioned above.