Technical outlook for commodities

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Fundamentally, weak demand is expected to weigh on the prices. On the other hand, the charts too are bearish and there are no signs of a bullish reversal yet. In fact, price action hints at further downside.

LME Copper ($7,190.5)

Post hitting a high of $10,845 in March, the three-month rolling forward contract of copper on the London Metal Exchange (LME) began falling. From the current level of $7,190.5, the contract is likely to fall further towards the nearest support at $6,850, where the 61.8 per cent Fibonacci retracement of the prior rally lies.

A breach of this can drag the contract to $6,250. If there is a recovery from here, it can be capped either at $8,400 or at $8,500 from where there could be a fresh fall. We might not see the contract rallying above $8,500 this year.

Support: $6,850 and $6,250

Resistance: $8,400 and $8,500

LME Aluminium ($2,343)

The three-month rolling forward contract of Aluminium on the LME hit a high of $4,073.5 before reversing lower. A month ago, it invalidated a crucial support at $2,750 and is currently trading at $2,343. There appears to be more on the downside. While $2,300 is a minor support, the contract is expected to gradually fall below this level and reach the support band of $2,000-2,100 before the end of this year.

If at all there is recovery, either from the current level or after declining to the $2,00-2,100 range, it will most likely be restricted to $2,750. That is, the contract is set to end the year below $2,750 in any case.

Support: $2,100 and $2,000

Resistance: $2,500 and $2,750

LME Zinc ($2,915)

The three-month rolling forward contract of zinc on the LME marked a record high of $4,896 in March. It then made a U-turn and tumbled. The contract extended the fall and last week it breached a key support at $2,950. This leaves the door open for another leg of a downswing from here and the nearest notable support is at $2,500.

Subsequent support is at $2,370 thus making the price area of $2,370-2,500 a support band. The contract is likely to fall to this region before the end of this year. If there is a rally from here, it can be capped at $3,130.

Support: $2,500 and $2,370

Resistance: $3,130 and $3,400

LME Lead ($1,944)

After largely staying in the range of $2,135-2,480 between June 2021 and mid-March this year, the three-month rolling forward contract of lead on the LME breached the support at $2,135 in March. This turned the outlook bearish for the contract. Yet, currently hovering around $1,944, the contract has been moving within the range of $1,880-2,000 for the past few weeks.

If it falls below $1,880 from here, it can fall to $1,750 before the end of this year. But, on the other hand, if it breaks out of $2,000, it can rally to $2,135, but not beyond that.

Support: $1,880 and $1,750

Resistance: $2,000 and $2,135

Brent crude futures ($101.16)

The Brent futures on the ICE (Intercontinental Exchange) hit a high of $139.4 in March. But then it lost momentum and has largely been oscillating between $98 and $124. The contract is currently testing the support at $98. A break downwards below this level can change the near-term trend to bearish and such a break will almost certainly drag the contract to the immediate notable support at $85.

Thereafter, it could stay within the $85-100 price region for some time. If Brent futures slip below $85, it could see a decline to $70. A fall below $70 in 2022 though can be a low-probability event.

Support: $98 and $85

Resistance: $115 and $124

Published on July 16, 2022