Commodity outlook by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:
Commodity Outlook: US Dollar Index is trading at 15 week high. The resistance level of 92 is breached and with fears of trade war receding, green back has gotten the boost it needed to break the range of 90.80-91.50. With the rise in inflation and central banks in Europe and Japan in no rush to tighten, dollar is getting the right ammunition to propel forward. The US Fed is expected to hike rate in Jun although the May meeting was less hawkish than expected. After Fed meet, US dollar is sliding and giving much needed retracement on the downside. Although the medium-term outlook still looks positive. We expect US Dollar index to touch 93 before sellers will try to move prices down. Indian Rupee is trying to hold on its ground against rising US Dollar. We expect Indian Rupee to strengthen until 66.60-66.65 before it resumes its upside. Macro data from India are weak so we don’t expect our currency to appreciate against US Dollar much. Out medium term target for USDINR May Future is 67.20-67.30.
Gold is trading at critical support of 50% retracement and 200 day moving average in COMEX. $1304 is the level that we are watching for. We expect Gold to get support in range of $1280-$1300. At present it is trading at 2 month low and is at complete mercy of US Dollar. Any correction in green back can only lift gold prices. Gold is trading in the upper channel line since Feb 2018 and the trend is under threat if it breaks 30800 on the downside. As we have said, gold is at critical support both in COMEX and MCX. If 30800 are breached, next support comes at 30500. Any long position can only be added if gold manages to move above 31000 as the event of US Fed is already over so we may see some bounce in prices.
Crude Oil saw some minor profit booking as US API reported larger than expected inventories. Strong dollar also helped in capping the prices. COT report shows that large speculators are trimming their bullish bets. US Crude Oil exports have also reached record high. The spread between Brent and Crude is $5.67 so it is helping US export more. When the Brent-WTI spread declines, US crude oil producer’s relative disadvantage to international oil producers is reduced. As long as Brent Crude remains above $72 and above 4400 in MCX, we are still bullish but the upside seems capped around 4650. We expect prices to oscillate between 4450-4600 within this week.
Sell Lead
Target: Rs 150
Stop Loss: Rs 155
Lead since March is trading in range of 150-158. The oscillator RSI_14 is trading below 50 so the trend is negative and on daily chart, prices is unable to sustain above 200 day moving average. Stochastic oscillator has also given sell signal and we expect lead to test the support of 150. We recommend creating short position with target of 150 and stop loss of 155.
Buy Nickel
Target: Rs 970
Stop Loss: Rs 900
Nickel is trading above 20 day and 50 day moving average which indicates medium term trend is positive. It is comfortably trading above 200 day moving average. The volatility which we saw during mid of April has subsided and is now trading according to its fundamentals. Nickel is bucking the trend against lead and zinc. Nickel is trading above 38.2% retracement taken from high of 1095.20 and low of 830.40. Next resistance comes at 50% retracement around 965. The price action is indicating buying interest as it has respected the low of 910.50 and making higher low on daily chart. The oscillator RSI_14 is trading above 50 so trend remains bullish. We recommend creating long position with target of 970 and stop loss below 900 on closing basis.
Buy Aluminum
Target: Rs 160
Stop Loss: Rs 152
Aluminum is leading the base metal pack. It is trading above 13 day moving average so short term trend is positive. RSI_14 is at 59 and since 24th April it is making higher low pattern formation. The short term resistance of 155 is also being taken out. If we take retracement from high of 178.85 and recent low of 145.50, it has successfully closed above 23.6% and is now near to 38.2% retracement. The marubozu candlestick pattern also suggest that buyers are more aggressive and we may continue to see the upward price action as there is no sign of any reversal. Our recommendation is going long with stop loss of 152 and target of 160.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.