MCX EVENING NEWS UPDATES - 25 June 2018

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Gold recovers early lost ground, back around $1270 level - 

Gold edged lower at the start of a new trading week, albeit has managed to recover early lost ground and is currently holding in the neutral territory around the $1270 region. A goodish pickup in the US Dollar demand was seen as one of the key factors exerting some fresh downward pressure on dollar-denominated commodities - like gold. After an initial uptick, the metal came under some renewed selling pressure and touched an intraday low near the $1265 region. However, global trade war tensions, leading to a fresh wave of global risk-off trade, as depicted by weaker sentiment around equity markets, underpinned the precious metal's safe-haven appeal and helped limit further downside.  In the latest trade-related developments, the US President Donald Trump threatened to escalate a trade war by imposing a 20% tariff on European car imports. Trump also planned to bar many Chinese companies from investing in US technology firms and block additional technology exports to Beijing, Wall Street Journal reported on Sunday. The risk-off mood was evident from the ongoing slide in the US Treasury bond yields, which remained supportive of a modest uptick witnessed around the non-yielding yellow metal. The broader market risk sentiment and the USD price dynamics might continue to act as key determinants of the commodity's movement in absence of any major market moving economic releases from the US.

Oil drops after OPEC+ output deal, but markets to stay tight - 

Brent crude oil fell 1 percent on Monday as investors prepared for an extra 1 million barrels per day (bpd) in output to hit the markets after OPEC and its partners agreed to raise production. Despite the increase, which is intended to stop the gap between global supply and demand from becoming too wide, analysts said global oil markets would likely remain relatively tight this year. Prices initially jumped after an OPEC deal to increase output was announced late last week, as it was not seen boosting supply by as much as some had expected. OPEC and non-OPEC partners including Russia have since 2017 cut output by 1.8 million bpd to tighten the market and prop up prices.

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Crude prices trading below 50 & 20-day SMA suggesting weakness in prices - 23 June 2018

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Prices had rallied in 5 waves and after that the correction which we saw can be termed as wave a and now prices could have a pullback in wave b towards 38.2 retracements at 67.10, 50 percent is at 68.2 and 61.8 percent is at 69.3, says Priyank Upadhyay of SSJ Finance & Securities.

Oil prices rose by around 1 percent on Friday, lifted by uncertainty over whether OPEC would manage to agree on a production increase at a meeting in Vienna later in the day.

WTI Crude was at USD 66.35 a barrel. After weeks of back-and-forth sparring, Saudi Arabia and Russia have reportedly reached a preliminary deal to boost crude supply by 1 million barrels per day but other OPEC members including Iran have opposed this.

Some countries are unable to ramp up capacity to such an extent, so the actual increase may amount to more modest 600k barrels per day. A net increase of 600-800k barrels per day is probably priced in already and the announcement of such a modest boost may even trigger a relief rally.

OPEC agreed on Friday to raise oil production by around 1 million barrels per day from July for the group and its allies. The output gain is nominal. The real increase will be smaller because several countries that recently under produced oil will struggle to return to full quotas while other producers will not be allowed to fill the gap.

This could lead a pullback towards higher levels. Apart from the OPEC meet market will also take cues from movement of dollar index, recent strength in dollar index from 92/93 to 95 has pressured oil prices and now dollar index is approaching a resistance area of 95.50/96 and has turned lower from there towards 94.50 which could provide support to oil prices and we could expect a pullback rally.

Crude Oil Technical Analysis:

From the above chart, we can see crude prices after hitting USD 72/73 (MCX: Rs 4,900/5,000) in the month of May are continuously trading with a negative bias and recently made a low of 63.59 (MCX: Rs 4,316) and after that are trading in a range of 63.59 (MCX: 4316) and 67.16 (MCX: Rs 4,575).

Prices had rallied in 5 waves and after that the correction which we saw can be termed as wave a and now prices could have a pullback in wave b towards 38.2 retracements at 67.10, 50 percent is at 68.2 and 61.8 percent is at 69.3 and after that we could see correction in prices in wave c which can go below 61.80.

Now, the resistance is placed at 67.20 (MCX: 4580) and a break above that we could see a rally towards 68.60/69.40 (MCX:4650/4700) zones.

Supports are placed at 64/63.50 (MCX:4335/4300) zones and break of supports could see prices heading lower towards 61.80 (MCX:4200) levels. Prices are trading below the 50 and 20(SMA) suggesting weakness in prices.

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MCX Daily Report : 22 june 2018

Gold Prices Move Off Lows as Dollar Rally Stalls.

Gold prices eased from fresh lows for the year as the dollar turned negative on weaker U.S. economic data. A sharp retreat in the dollar – from its highest level since last summer – supported a recovery in gold but sentiment remained negative amid expectations a more aggressive Fed rate-hike cycle would continue to spur demand for the greenback. Following the Fed's rate hike last week, and more hawkish outlook on rate hikes, gold prices have slipped 3%, as traders bet that the divergence between the Fed's hawkish outlook on monetary policy relative to other central banks will drive demand for the greenback. "The divergence between U.S. and rest of the world monetary policy will support longer and greater USD strength than we had anticipated," Barclays (LON:BARC) said in a note to clients.

Zinc import window unlikely to reopen end-Jun as yuan declines.

The import window for zinc is unlikely to reopen in late June as the yuan depreciates, SMM believes. The import window opened briefly in the middle of the month. Import losses will widen if the yuan continues to weaken against a strong US dollar. The yuan has declined since the middle of April as US-Sino trade tension grew. As of June 21, the yuan stood at 6.47 against the US dollar. SMM also believes that potential arrivals of imported zinc in the following days are likely to be directed to bonded areas given the current glut.

 Further potential price declines deter Shanghai spot nickel buyers. Purchasing interest among downstream consumers in Shanghai's spot nickel market cooled on Thursday June 21 from June 20, as most market participants believed that prices of futures would decrease further, SMM learned. Prices of futures rose in the morning and spot premiums edged down 100 yuan/mt from the previous day. Downstream consumers were keen to inquire about prices but held back from purchasing in anticipation of further declines. On Thursday June 21, most transactions in Shanghai were heard at 116,050-116,450 yuan/mt. Norilsk nickel traded at a premium of about 600 yuan/mt against the Wuxi Stainless Steel Exchange 1807 contract, while Jinchuan traded at a premium of about 700 yuan/mt.

Oil Prices Rise Ahead of Key OPEC Meeting

Oil prices climbed more than 1% on Friday, with all eyes on OPEC and its allies as they meet in Vienna later on Friday.The Organization of the Petroleum Exporting Countries (OEPC), a producer cartel de-facto, is meeting with some non-OPEC members including Russia in Vienna later today to discuss possible crude output hike. The group started withholding supply in 2017 to prop up prices. Saudi Arabia and Russia, both of which have the ability to increase production, are opting for a substantial output hike.

Meanwhile, countries without spare capacity, including Iraq, Iran and Venezuela, prefer to keep the supply limits in place. It was reported earlier this week that China is considering to impose tariffs on U.S. crude imports. The 25% duty on U.S. crude imports, should it be implemented, could potentially make American oil uncompetitive in China.

MCX Crude Oil July on Thursday as seen in the daily chart opened at 4479 levels and day high of 4504 levels. During this period price corrected & made day low of 4385 levels finally closed at 4496 levels. Now, there are chances of further upside movement technically & fundamentally.

 Ahead of the meeting, Saudi Arabian Energy Minister Khalid al-Falih said on Friday that OPEC and non-OPEC members were close to agreeing on a deal to raise oil production.

 "The actual decision by OPEC and its partners – which may not actually become apparent until Saturday – is the big one traders are watching," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

 Oil prices were under pressure earlier this week after U.S. President Donald Trump said on Monday that he has ordered the U.S. Trade Representative to identify $200 billion worth of China goods for additional tariffs, escalating a trade dispute between the world’s two largest economies.


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