Zinc futures fall as dollar rebound; Choice Broking says outlook bullish

Zinc prices edged lower to Rs 235.80 per kg as participants increased their short position as seen by the open interest. The base metal traded extended decline to trade at day’s low in the evening session on worries of tightening US monetary policy and weakening demand in top consumer China.

On the MCX, Zinc delivery for June dropped Rs 1.50, or 0.63 percent, to Rs 235.80 per kg with a business turnover of 2,225 lots. The same for July contract slipped Rs 1.65, or 0.70 percent, to Rs 235.20 per kg with a volume of 207 lots.

The value of June and July’s contracts traded so far was Rs 495.99 crore and Rs 4.12 crore, respectively.

The US dollar index traded higher at 90.03, up 0.07 percent against major currencies in the evening session.

Sunand Subramaniam, Senior Research Associate, Choice Broking said, “Fundamentally for the month ahead, we expect global and MCX Zinc futures to trade bullish after the reports of recovering economic data in the Asian markets and the United States. This is expected to increase the demand in the international markets as mining work and refined metal production is expected to rise.”

“Although earlier months have forecasted decline in production with the fall in demand/usage of metals and ores. But then, we are also forecasting demand to remain strong especially in China and other Asian countries with positive economic reports. Expectancy for higher demand for steel for E-vehicles to support prices as well”, Subramaniam added.

According to the International Lead and Zinc Study Group (ILZSG), the global zinc metal production for March 21 has risen to 1,159.5 thousand tonnes, higher compared to 1,143.4 tonnes in the preceding month. Zinc usage has been reported to be higher at 1,157.4 thousand tonnes for March 21 compared with 1,162.9 thousand tonnes reported during February 21.

Technical

The non-ferrous metal has been trading higher than 20, 50, 100 and 200 days' moving averages but lower than the 5-day moving average on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 51.78 which indicates neutral movement in prices.

At 1327 (GMT), the base metal price dipped 0.72 percent at $2,997.50 per tonne in London.

Trading Strategy

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited

MCX Zinc has been trading with marginal negative bias. If prices resist below Rs 237.5-238.2 levels we may expect the market to decline during the evening session, testing Rs 235-234 levels on the downside.

Geojit Financial Services

Geojit Financial Services said, “Resuring trades above Rs 238.40 could boost prices higher. Inability to challenge above the same may push prices lower in the later session.”