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Web Special: Evening commodity update

SI Reporter/Mumbai 18 Jul 12 | 07:00 PM

The US Federal Reserve Chairman in his testimony the other day provided little cues on another round of quantitative easing, pouring cold water on market expectation over additional stimulus. Besides, Bernanke offered a gloomier outlook of the US economic growth prospects while, keeping doors open for monetary action if necessary. The overall market sentiments were on the bleaker side following the testimony and as economic indicators from other major economies provided hardly any positive indications to cheer about. Spot gold and silver ticked lower weighed down by a weaker Euro and on uncertainty existing over additional monetary easing by the US Fed. Base metals were mixed in LME. Copper was seen rebounding from its previous session losses. Crude oil prices eased on weak global economic outlook. However, simmering Iranian issue and fall in crude oil stockpiles provided firm support. American Petroleum Institute data released earlier today showed a drawdown in crude oil inventories by two million barrels the previous week. EIA is scheduled to release its weekly inventory report later today and is forecast to show a decline in crude oil inventories while gasoline and distillate inventories are seen up. In the domestic scenario, global commodities in MCX were caught in tight ranges, waiting for fresh cues for further directional moves. Precious metals continued to consolidate in narrow ranges. Weakness seen in the international market weighed on, yet weak rupee provided lower level support to keep prices in tight ranges. Base metal complex traded mostly steady while crude oil inched up extending the previous session gains.


Market mood was downbeat after Federal Reserve Chairman Bernanke did not commit to any action, dashing market hopes of a quantitative easing in the immediate run. Economic data out of china continue to thwart financial markets with another round of bleak numbers and is calling for a ground reality check that a hard landing could become inevitable for the economy. After restraining from any more easing yesterday before the senate, Bernanke is all set to dictate market moves into the evening session as he prepares to give a semiannual report on the U.S economy before the house. With the housing sector in the U.S showing signs of consolidation after lingering in the doldrums since the recession in 2009, the housing starts and building permits figures would be keenly watched for into the twilight session to substantiate renewal in the sector. Also, in the limelight ahead this week would be the German parliament vote on Spanish bank aid on Thursday, after Euro zone finance ministers agreed last Monday on a rescue package of up to €100 billion for Spanish banks. Overall, the day is likely to remain incarcerated to the Fed and the U.S economic data.

Technical Commentary


Prices have been stuck in a tight range between 29180 -29380 region for last continues days after a long liquidation pressure. Even in this puzzling sentiments, inability to break below 29180 region may push prices towards 29380/470. In the mean time, trade below 29180 could show way towards 29030/28950.


Prices have been consolidating inside 53800-52200 levels for the last few days. Breaking any of the sides of the region would require suggesting fresh directional moves. Else, we would see choppy with mild negative bias session.


Dips likely to find support near 421 followed by a consolidation and drift higher. However, prices needs to trade consistently above 427 to trigger fresh bullish rallies. Conversely, drop below 421 would be an early signal of bearishness again.


Range bound with mild negative session is expected initially. Either side of 905-885 levels if cleared will provide signals of strong directional moves.


Prices are in favor to continue the bullish momentum if able to surpass above a cluster region of 4925-30 unfailingly to target levels of 4960-75 region. In ability to sustain above the mentioned levels could see a correction towards 4885/4845 territory. The 4820-30 levels are holding the prices up and continuation of trades above these levels could prop up prices towards 5090 in the near term.

Source: Geojit Comtrade

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