The base metals pack traded on a mixed note on Tuesday, with zinc, lead and aluminum ending in the green, whereas copper and nickel declining marginally to close in the red. Inevitable profit booking at the higher levels exerted pressure on the metal prices.
Moreover, choppy financial markets and increasing inventory levels on the LME warehouse also capped gains in the base metal prices yesterday. However, weakness in the DX supported the base metal prices from a sharp decline. The DX closed at 80.61 against a basket of currencies on Tuesday.
Copper prices declined marginally to close at $7405/tonne on the LME on Tuesday, after touching an intra-day high of $7480/tonne. Another factor that exerted pressure on the copper prices yesterday was the increasing inventories on the LME warehouse.
Copper inventories increased by 1,000 tonnes to reach 414,075 tonnes on Tuesday. The trend of declining inventories seems to be ending as copper inventories have increased in three out of the last five sessions.
Nickel prices slipped on the LME stage on Tuesday after hitting an intra-day high of $21,815/tonne to close at $21,525/tonne. Nickel inventories declined by 222 tonnes to reach 118,158 tonnes yesterday.
But this positive sentiment was faded away by a simultaneous decline in canceled warrants- the metal booked for removal from the LME warehouse. Cancelled warrants declined by 234 tonnes yesterday.
OUTLOOK
On the macro-economic front, the US authorities are expected to announce economic data on job cuts, Non-farm employment change and ISM Non- Manufacturing PMI today. Economic updates are constantly coming on the negative side, raising concerns over a fragile economy state in the world’s largest economy.
Poor economic data from the US is indicating that the Federal Reserve may avoid raising interest rates for a further period to support the economic recovery. This is leading to weakness in the DX, which is a low-yielding currency.
Financial markets are expected to trade on a choppy note today. Base metal prices will take cues from the sentiments in the equity markets. However, metal prices will be supported on the downside on the back of weakness in the DX.
Copper
Copper prices will trade with a sideways bias today with immediate support for MCX August contract seen at Rs.339.40 Further below; crucial support is seen at 336.50 levels.
Whereas resistance is seen at Rs. 344.50 levels & further upwards at Rs. 346.75 levels.
Zinc
Zinc prices will also trade with a sideways bias today with immediate support seen at Rs.94.70 level for MCX August contract whereas crucial support is seen at Rs.93.80 level. Short-term resistance is seen at Rs.96.80 whereas major resistance is seen at Rs 97.90 levels.
