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Is the current rally In Base Metals sustainable?

September, 4th, 2017

Base Metals are in sharp Bullish trend from last one month and currently all of the base metals trading near to their multiple months high. Fundamentally the current rally in the base metals supported by global economic growth and on the hopes of increase in demand, especially in China (the world’s largest producer and consumer of base metals) due signs of stability in the Chinese economy. Demand from the Euro zone coupled with the weakness in the U.S. dollar also worked as the catalyst for the bullish movement in Base metals.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies (Euro, Japanese yen, Pound sterling, Canadian dollar, Swedish krona and Swiss franc), has fallen almost by 11 per cent at 91.55 year-to-date and currently trading to more than two and half year low. In general, there is an inverse relationship between the value of the U.S. dollar and base metals prices. When the value of the U.S. dollar increases against other major currencies, the prices of base metals tend to drop and when the value of the U.S. dollar decreases against other major currencies, the prices of base metals move higher. This is a general rule, but it doesn’t hold true every time.

 

Let’s have a look at the current scenario of base metals with the help of below mentioned summary table:-

The best performing base metals year-to-date is Copper with almost 15% gain followed by Aluminium, Zinc, Lead and Nickel with 14.13%, 13.29%, 11.91% and 8.56% gain respectively till 30th Aug 17.

Technically base metals were in consolidation phase from the start of the year & have given a sharp upside movement in last one month. The current rally in base metals is supported by good volume and strong technical indication and we can expect a continuation in it. Let’s have a look at the technical outlook for the base metals in the short term:

 

Copper: Copper is leading to the rally in base metals. Technically copper is sustaining near to 3 year high and in the short term (1-3 months) it can test the levels of ₹465-475 on the upside. It’s having a major resistance level at ₹485 and there are less chances of Copper to sustain above the same.

 

Aluminium: Aluminium is following to the Copper in best way and currently sustaining near to 9 year high. In the short term, it can test the levels of ₹142-145 on the upside.

 

Zinc: Zinc is trading near to 9 month high and having a resistance level at ₹204.20. In short term, if it breaks the level of ₹204.20, then it can test the level of ₹209 on the upside.

 

Lead: After testing 8 month high, lead recently made a low of ₹146.90, still we can expect upside movement in it till the levels of ₹161 - 164 before falling further.

 

Nickel: Nickel is the slowest one in the current rally but still witnessed almost 9% gain in last one month. Technically, we can expect bullish movement in it till the levels of ₹810-820.

 

As the demand for the base metals is quite strong and getting better due to global economy growth coupled with the indication of the upside rally on the charts, we can say that the current rally in base metals is sustainable.

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