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Web Special: Evening commodity update

SI Reporter/Mumbai 24 Jul 12 | 06:39 PM

Global commodities were seen rebounding from the previous session losses although weak global economic cues continued to build selling pressure. The Chinese Flash manufacturing data released earlier today provided a lift to the base metals and crude oil. Chinese PMI data rose towards the 50 level in July, it’s highest since February. However, weak manufacturing data from the Euro Zone capped gains. Moody’s cutting Germany’s outlook to negative and surging Spanish bond yields too weighed on the sentiments. Base metal complex in LME were seen trimming its earlier gains following the Euro Zone PMI data. Crude oil inched up after falling steeply the previous session to a one week low. However, data from the Euro Zone overshadowed the signs of improvement in the Chinese economy, keeping gains under check. Bullion continued to remain trapped in thin ranges. Spot gold traded mostly steady. Weakness in Euro weighed on the sentiments. The Euro weakened and was seen hovering near its two year low against the US dollar after German and Euro Zone manufacturing activity shrank amid intensifying worries of worsening financial conditions in Euro Zone economies. In the domestic scenario, precious metals traded mostly steady with a mild negative bias. However, depreciating rupee provided firm support. Rupee breached 56 a dollar mark, falling to the lowest in three weeks. Meanwhile, base metals and crude oil moved to a negative territory in MCX after a positive opening.


Market mood remained skeptic as concerns over the Euro zone crisis and flagging global growth continued to weigh on investors’ mind in spite of a strong Chinese factory figures, although the headline numbers indicated contraction for the ninth month running. With the crisis in Europe showing no signs of retreating, looking ahead into the evening session, European Central Bank (ECB) and IMF inspector are slated to meet in Greece to evaluate the progress of the country amid fears that a possible exit could become inevitable in the near future. However, into the evening session, no major data from the U.S are scheduled for release. The week is packed with heavyweight economic indicators from the U.S, which includes Durable goods orders, new home sales and GDP. The GDP number from the U.S on Friday is most likely to paint an anguish figure with growth slowing to 1.40 percent in contrast to 1.90 percent, a sign of further impeding for the financial markets. Overall, the week is likely to remain incarcerated to the developments in Europe and the U.S economic data.

Technical Commentary


Prices have been trading with a mild positive sentiments with a initial target of 29480/560 or even higher. But we cannot rule out the possibility of an initial dip for a swing higher. On the contrary, drop below 29320 region could magnetize intraday selling with a limited target of 29260/180.


Prices likely to consolidate inside 53300-52000 levels with mild negative bias. Either side breakout would suggest fresh directional moves later.


Pullbacks towards 421-422 regions are expected to attract liquidation towards 416 initially, which if cleared would continue the sentiments till 412/409 later. Sustained trades above 424 could negate our bearish outlook.


Prevailing weak bias is expected to continue as long as 898 caps the upside. However for the day, prices need to clear the support of 872 to set off long liquidation pressure towards 860/852 levels.


Prices are on a corrective path after establishing 7-straight successive days of rally last week. The present selling momentum is likely to find support near 4940 for a turn higher towards 5010/5050 levels. On the contrary, a break past 4940 could call for liquidation towards 4870 region.

Source: Geojit Comtrade

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