Indian rupee, once again, breached 76 levels on the upside because of the rise in infection cases of Covid-19 in India. Strong US dollar and sell-off in Indian indices have made Rupee vulnerable. We expected the Rupee to test 75.20-75 levels before retracing back and Rupee retraced around 75.50 levels. Any strength in Rupee is only expected below 75. Once again, we expect the Rupee to continue its journey till 76.60-77 levels.
Gold spot price is trading around $1,700 and in the past three trading session, gold is confined in a narrow range of $1,690-$1,715. Risk appetite is increasing with opening of economies which is pushing gold prices down but an escalation of tension between the US and China is pushing prices up from the bottom so gold is weighing which side to go. Gold volumes are decreasing and speculative open interest has peaked out and that is why gold is trading in a narrow range. Once volume picks up, we could see directional move in gold. One of the reasons for gold to remain muted is the positive correlation between gold and reverse repo where now there is less shortage of US dollar and so reverse repo is decreasing. In the medium to long term, gold still is positive as interest rates close to zero continue to favor the upside for gold by keeping real rates in negative territory for now
If the gold market starts to take off to the upside, we could see silver follow, but with a lag. Only if the copper market starts to take off then we could see silver outperforming gold as both silver and copper are traded as base metals. On the four-hour chart, we see that the silver price has been moving in a sideways direction in the past two weeks. Silver's support comes at 40,950 since the past three trading sessions; it has bounced from those levels. It needs to break 43,500 for any upside momentum as that is the next resistance on the upside. A move below the support and above the resistance will likely be the start of a new trend.
The discount on Crude oil for June delivery relative to July narrowed to the least in a month, indicating concerns about over-supply may be easing. In spite of large build up in crude oil inventories, prices have rallied on hopes of demand increasing after partial open of economies and production cut kicking in May from OPEC+. The 50 day EMA is currently sitting at the $28 level in WTI and therefore any signs of exhaustion in that general vicinity will be an opportunity to sell. In MCX, crude oil has gained from 800 to 1,900 in a straight rally and has reached 61.8 per cent retracement. Now is time to be cautious in the long position as the rally seems overextended in the short term. The upside rally may come under threat below 1,650, which is 50 per cent retracement.
Currently, natural gas has made high around $2.15 where 200 day moving average is, so it has tested the resistance and has retraced back to $2.05. With swelling inventories and suppressed demand from Covid-19 shutdowns and seasonal factors, we don’t feel natural gas may sustain at higher levels. On the daily chart, it has made ‘harami candlestick pattern’ after big bullish candle indicating the trend reversal. The range of 162-65 is a strong resistance zone and we expect natural gas to come till 150-148 levels.
Buy Nickel around 925 | TGT: 960 | Stoploss: 900
Nickel took support around 900 and then bounced back till 932. Momentum indicator RSI_14 is above 50 and prices are also quoting above 20 and 50 DMA. Nickel had made ‘morning star’ candlestick pattern near recent swing low of 901 and so we expect the rally to test 960 levels. Hence, we recommend going long around 925-920 for an expected move till 960 and stoploss of 900 on a closing basis.
Sell Natural Gas | TGT: 138 | Stoploss 160
Natural Gas has made an ‘inverted hammer’ candlestick pattern at the top end of the range which is a sign of reversal. The following candle was ‘Bearish Belt hold’ line which was confirmation of the bearish trend. The fast stochastic indicator has given sell cross over so we would recommend going short in Natural Gas with the target of 138 and stoploss of 160.
Disclaimer: Bhavik Patel is Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are personal.