Commodity Research Report Ways2Capital 08 Nov 2017
Added: (Wed Nov 08 2017)
Pressbox (Press Release) -
Last week, MCX gold prices traded sideways for the entire week and sustained above the major psychological support level of Rs.29000. In the later part of the week, we observed some negative movement in it due to weaker than expected employment report for October. As per the data from U.S. Labor Department, the U.S. economy added 261000 jobs whereas the forecast was for 315,000 new jobs. The fall in the unemployment rate ticked down to 4.1%, its lowest level since December 2000.
The U.S. Dollor Index, which measures the green back strength against a trade weight basket of six major currency rose by 0.04% and closed at the level of 94.86 on weekly basis. Gold’s gains were held in check as the U.S. dollar continued to trade near three month highs against a currency basket. Bullion is often used as a safe haven in times of geopolitical and economic uncertainty, while riskier assets such as equities are generally sold off.
MCX Silver also traded sideways taking cue from the Gold and closed at Rs.39048 with the marginal loss of 0.26 per cent on weekly basis. The recent U.S. economic data may delay the decision of interest rate hike by U.S. Federal Reserve as Unemployment rate use to serve as the important factor for interest rate hike decision. Ahead of the coming week, Unemployment Claims, Consumer Sentiment & Trade Balance will further provide direction to the bullion.
✍ BASE METAL
Last week, MCX Copper witnessed choppy movement for the entire week and managed to closed at Rs. 445.80, similar to its last week closing. As per the ECB comments in its last meeting, it was deemed to be more dovish about the economy. The central bank said that it is reducing its monthly bond-buying program amount by half, but is extending the time-frame of the bond buying. This led to sharp upside movement in the Dollar Index towards three month high and also supported base metals to sustain on higher levels.
Expectation of high demand coupled the tight supply further providing the strength the the Copper. Supply tightness was confirmed by latest figures from International Copper Study Group (ICSG) which said copper market should see a deficit of 151,000 tonnes this year and a deficit of 104,000 tonnes in 2018.
Last week, we saw sharp upside movement in the prices of Nickel and it made a high of Rs.841.90 during the week and closed at Rs.820.10 with the overall gain of 9.35 per cent on weekly basis due to strong demand. The expectation of boost in demand due to rise in electric car buying, acting as the catalyst for the bullish movement in it as manufacturers are trying to boost usage of nickel in electric vehicle batteries in as a substitute of expensive cobalt.Lead, Zinc & Aluminium traded sideways to positive for the most part of the week.
Last week, NYMEX Crude Oil traded near to its more than 2 year high on the expectation of further extension in deal to curb production by major global producers beyond its current expiry date next March. It made a high of $55.76 and closed at $55.64 with the overall gain of 3.22 per cent on the weekly basis. Its the fourth straight week gain for the crude oil and almost 10 per cent increase in the prices in last 1 month.
MCX Crude Oil also witnessed positive movement taking cue from the NYMEX crude oil and closed at Rs.3579 with the weekly gain of 2.22 per cent on weekly basis. As per the data from Baker Hughes, the number of active U.S. rigs drilling for oil fell by eight to 729 last week. That was the fourth weekly decline in last five and further providing support to positive movement in Crude oil. Last week U.S. Crude Oil inventory came lower than the expected, forecast was for -1.5M where as the actual level came at -2.4M.
Last week Natural Gas MCX Nov futures traded sideways for the most part of the week and sustaining near to major resistance level of Rs.204. Prices are still unable to get any cue due to maintained inventory level from last 2-3 weeks but technically in short term, we can expect good upside movement in it.
NCDEX - WEEKLY MARKET REVIEW
✍ SPICE COMPLEX
Turmeric Dec Futures may continue sideways to negative movement and may trade in the range of 7000-7300 due to lack of demand & availability of stock. The traders are quoting decreased price, after verifying the sample as only medium and poor quality turmeric is arriving for sale in major mandis. Turmeric prices at present is ruling around similar to last year’s level, but still not able find good demand mainly due to ample stocks in the country. Further, buyers are not in mood to make any bulk purchases as new crop is said to be in satisfactory conditions with production expected slightly higher than last year.
Jeera Dec Futures is likely to sustain above the major psychological support level of Rs.19000. Fundamentals are strong as the stock left is thin in the market and there is still a long way for the new crop to enter the market. The new Jeera crop will now arrive only from February, which means that four months of time span left before new crop hits the market.
Coriander Dec Futures is likely to trade negative & below the support level of Rs.5000 we can expect good downside movement in it. Coriander sowing in the producing belts of Rajasthan started from first week of November and sowing progress report will decide future trend for the commodity.
✍ OILSEED COMPLEX
Soybean Dec Futures is likely to witness sell on rise & test 2800-2750 levels as the demand for the commodity in the spot market is very poor mainly from crushers due to poor domestic and export demand for soy meal. The Soybean prices are likely to remain under pressure till 15th December due peak supply period along with huge carry-over stocks of about 1.5-2 million tons.
Last week, Refined soy oil Dec futures prices witnessed sharp upside movement & broke the major resistance level of Rs.700. It traded near to nine month high and is in uptrend since past four weeks, buoyed by higher quoting soy oil price on CBOT. However, the upside may get limited from here on as the retail demand of soy oil is very limited so most of the wholesale traders are procuring soy oil as per requirement. RM Seed Dec Futures is expected to trade positive
and if it sustains above the resistance level of Rs.4000 then it can test the level of Rs. 4100 during the week. Mustard oil crushers are also active in buying mustard seed with anticipation that demand for its oil will improve ahead amid winter season.
Secondly, the initial data of sowing highlights that only 25% of the 2017/18 mustard crop has been planted in Rajasthan as compared to 70% that was planted last year at this time. The ideal planting window for mustard is up to November 20th & any more delay in mustard seed will hurt yield leading to lower production next season.
✍ OTHER COMPLEX
Kapas Futures (April 18) is likely to trade sideways in the range of 888-860 levels. At present, there is not much clarity in the price direction & in days to come the new crop supply will be a trend setter and needs to be keenly observed. The other factor which needs to be look out is the procurement procedure. Around 40 centers of CCI in Gujarat begin the procurement procedure while the remaining 16 centers will catch up eventually.
Guar seed Dec Futures sustaining near to support level of Rs.3600 but we can expect further downfall in it. The market participants are keeping a close watch on the crude oil prices, shale gas production and U.S rigs count. The current pace of arrivals are also likely to decline gradually ahead as current rates may prompt farmers to hold their produce in the anticipation of better return this season due to prospects of lower crop estimates.
Chana Dec Futures witnessed short covering from the lower levels but we further expect negative movement in it till the level of Rs.4500 in the short term. According to the market participants, chana sowing acreage in the coming rabi season may be higher than last year as prices was firm throughout the year. According to the target estimate released by government, India’s chana production target estimate for 2017-18 is 97.5 mt which is slightly higher than 2016-17 fourth advance estimates of 93.3 lakh tonnes
NCDEX TECHNICAL VIEW
Last week Guarseed Dec Futures witnessed sideways movement for the most part of the week and sustained below the resistance level of Rs.3800. Technically for the next week, we can expect downside movement in it and if it breaks the support level of Rs.3630 then it can test the level of Rs.3550-3510 till the end of the week.
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