Commodity outlook by Tradebulls Securities: Buy crude, zinc

Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls.

The dollar index has broken 95 levels after US Fed held interest rate steady as expected. Fed stated that they will be patient in lifting interest rate further this year because of rising uncertainty about the U.S. economic outlook. The statement was dovish which helped Euro and other currencies appreciate against US Dollar. Meanwhile, our currency opened strong thanks to weak US dollar but is unable to sustain lower as crude oil prices have increased and with Interim budget round the corner, the market is expecting fiscal slippage to around 3.5% of GDP. So this will put pressure on our currency and as long as 70.80 is not breached in Feb future, buy on dips should be the strategy. We expect rupee to test levels of 72.20 in the near term.

Gold is trading at 8 month high. Last Friday, gold saw movement from $1285 to $1303 and yesterday we saw gold again getting boost till $1324 on dovish Fed statement. Clearly, the breakout has happened in Gold. Gold no longer fears competition from higher interest rates. Historically, whenever the dollar index has trended above its 50-day MA there have been significant currency-related headwinds for the gold price. Currently, DXY is trading below 15 and 50 day moving average so we are seeing impressive strides in gold. We expect gold now to test levels of $1340-$1345 but some retracement is expected as gold is in an overbought state in short term time frame. Now that US Fed event is over, we may see some sort of profit booking but the overall trend remains positive as long as $1290 is not breached. Any dips near $1313 should be used to create a fresh long position. In MCX, 32500 is where we would like to take a long position.

Crude oil prices have gained after US sanctions on Venezuela and concerns for a slowdown in demand is getting faded. Yesterday US crude inventory came lower than expected which is helping crude oil prices. Saudi Arabia is also committed to lower production to boost prices. We still believe the support of 3550 will hold and crude may see some sideways movement after rally from 3660 to 3900. Crude oil is expected to come to 3800 where we would initiate a long position.

Buy Crude

TARGET: Rs 4,050 

Stop Loss: Rs 3,720

Crude oil has made bullish belt hold candlestick pattern at its support area around 3600. Clearly, price action shows bullish sentiment and it is also trading above its 13, 20 and 50 day moving average indicating a positive trend in short and medium term. We expect some sort of pullback in prices and that is why we are recommending long position not at current juncture but near levels of 3770 where long position can be taken with expected upmove till 4050 and stop loss of 3720 on the closing basis. 3770 is the 50% retracement taken from the previous swing high of 3923 and low of 3570.

Buy Zinc 

TARGET: Rs 195 

Stop Loss: Rs 188

Zinc has given breakout from down trendline taken from highs of 204.15 and 203. It has also closed above 200 DMA after last Oct. The prices are overbought in the short term as we have seen the rally from 172 to 194 one way. RSI_14 has also touched 70 and retraced somewhat so we are expecting zinc to consolidate from here on. Primary trend still remains bullish and there is no evidence of a counter-trend or weakening of momentum on the daily chart. So we would again recommend buy near 191 with expected move till 195 and stop loss of 188 closing basis.

Disclaimer: The analyst may have positions in any or all the commodities mentioned above.