Tuesday, 8 December 2015

Commodity Markets Put Focus Back On Macro Economic Data From US


The focus now shifts back to macroeconomic figures from the US this week. ECB meeting saw Mario Draghi cut the deposit rates to -0.30% and extend the stimulus further out into 2017 - the market reaction to this was less than enthusiastic as the stimulus package was largely expected to be higher than the current purchases. The FED chair Janet Yellen in a testimony to the JEC said that a rate hike is warranted given the improving economic situation, adding that incoming data over the next week needs to be checked before the final decision can be made. Given that the rate hike is more or less priced in, commodities are unlikely to suffer a major shock when and if the eventual rates are a hike in the Dec 15-16 meeting. Yellen also mentioned that subsequent rate hikes would be delayed as we go ahead. The major shocker last week was the OPEC meeting where not only did the cartel keep production steady, it actually removed the collective quota potential paving the way for further supplies. With the inclusion of Indonesia into the group and further supply coming in from Iran going into next year, oil can only go down further. On the data front, we have a light week ahead with unemployment claims on Thursday followed by PPI and Retail sales figure the next day. Crude Oil and Natural Gas storage reports are scheduled on Wednesday and Thursday. The technical picture is a mixed one this week, precious metals may recover marginally this week after last week's rally on short covering. For Gold, resistance is seen at $1100.0 (Rs.26000.0) while support is likely to come into play at $1065.0-$1050.0 (Rs.25300.0-Rs.25200.0). COMEX Gold futures are at $1085.20 and domestic prices at Rs.25714.0 at the time of writing this. Silver is trading at $14.570 and could face resistance at $14.75 (Rs.35700.0) on the way up; support is seen at $14.37 (Rs.34800.0). Base Metals are expected to trade with a neutral bias this week. LME Copper could post potential rallies if it breaks above $4650.0 (Rs.314.0) while, on the downside, $4500.0-$4450.0 (Rs. 300.0-Rs.295) is a key support zone to watch out for. The rest of the metals are likely to track copper through the week. Crude Oil prices are most likely headed further down supported by worsening fundamentals after OPEC decided to keep production unchanged. Major support is expected to come in at $38.0 (Rs.2550.0) breaking which should pave the way for sub-$30.0 this week. Inventories report will be closely watched for any signs of a draw in stockpiles which could trigger a round of short covering. (Note: USDINR may have formed a temporary top and could strengthen further this week depending on other events, a strengthening rupee put downside pressure on domestic commodities and vice-versa.) CFTC Commitment of Traders According to the CFTC report, net length for gold futures dropped 6552 contracts to 9750 contracts; longs saw a drop of 648 contracts whereas shorts gained 5904 to 149042 contracts. Silver, on the other hand, saw a gain in net longs at 21890, up 2497 contracts last week. Crude Oil saw a further decrease in net longs at 208478 contracts, down 3547 contracts from a week ago. Net shorts in Natural Gas also saw a gain of 2590 to 215333 contracts.

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