In spite of a jump in crude oil prices, Indian rupee continues to remain strong against the dollar on the back of strong inflows from FIIs. We may not see too much depreciation in rupee until elections are not over. After touching 97, the dollar index has started retracing back to 96.50 after EUR and Pound started getting stronger on an extension of Brexit. We expect the rupee to test 68.80 levels before making a bottom. 70 has been defended and the next round of weakness may only come once that level is breached and sustained successfully.
Flat US equity market and weak US dollar helped gold prices on Thursday. Weak Indian rupee also helped in MCX. The fact that gold has closed above a key psychological level, $1300 per ounce, is significant. Currently, dollar weakness is the most significant factor in terms of gold prices today. People’s Bank of China raised reserves to 60.62 million ounces in March from 60.26 million in February. Headlines concerning the Libyan National Army’s march to acquire the capital Tripoli and Donald Trump declaring Iran's revolutionary guard as a terrorist organization helped the Gold remain strong. In MCX, because of the strong rupee, we are not seeing gains in gold and gold needs to break 32,300 for next leg of fresh upmove.
US crude has hit a 5-month high. Fighting in oil-rich Libya threatened to disrupt exports as eastern forces were advancing on the country's capital. OPEC+ has pledged to withhold around 1.2 million barrels per day of supply this year. US sanctions against Iran and Venezuela were also seen pushing up crude prices. Brent crude is at $71 and we expect it to test levels of $73-$74. We should see some sort of pause around that level. Now that 4,500 has tested in MCX, if crude sustains above 4,500, next level comes at 4,650. Long position can be taken around 4,380 as a buy on dips should be the strategy.
Last week, Zinc touched its overbought zone of 70 (RSI_14) on the daily scale and has retraced back to 68, indicating top has been made short-term. Doji candlestick on top of the swing on daily scale followed by bearish candlestick indicates selling pressure has increased. Fibonacci retracement shows next target of 219-218 and we would recommend a short position from the current level for the target of 218 and stop loss of 232.
STOP LOSS: 37,100
Silver has made hammer candlestick formation on the swing low indicating bottom has been placed for short term. Any downfall is propped by buying and we may see Silver test its 200 DMA which comes around 38,500. With fundamentals pointing strongly in north direction for Gold and Silver, we expect silver to participate in the rally. So we recommend a long position in silver with expected upmove till 38,500 and stop loss of 37,100 closing basis.
Disclaimer: The analyst may have positions in any or all the commodities mentioned above.