China’s Impact, Rising Inventories-What Lies Ahead For Zinc?

Zinc falls on China fears, rising inventories, further pressure likely, Zinc prices fell more than two percent to reach their lowest level. What lies ahead?

Zinc prices fell more than two percent on Thursday to reach their lowest level in more than five months. It was hurt by rising inventories and concerns about the impact of problems in China’s real estate sector. copper hit its weakest level in nearly three months.

The main use of zinc is steel galvanizing, and half of the global demand comes from the construction industry. In addition, the outlook for base metals has been further weakened by continued macroeconomic headwinds in China, the world’s largest consumer.

National deflation unexpectedly rose to a 14-year high, while the official manufacturing PMI fell for a fourth straight month in January.

The weakness in the zinc market is also reflected in LME zinc shares, which have risen 14% over the past 10 days to a monthly high.

LME Copper HG1! fell 1.1% to $8,318 a tonne, the weakest since Nov. 17, as the dollar strengthened and investors worried about China’s economy. MCX zinc fell 2.37% to 210.00.

The dollar index strengthened against major peers on Thursday after unemployment figures again pointed to the US labor market, reinforcing the US Federal Reserve’s message that interest rates will not be cut anytime soon.

A strong US currency makes dollar goods more expensive for buyers using other currencies.

Technical Outlook – Zinc

Zinc prices fell in the biggest intraday collapse since 04/12/2023. Yesterday, prices fell to an almost five-month low of 209.30 and fell 2.42% to 210.05.

On the above chart, prices broke the ascending channel support and formed a long bearish candlestick. Both point to a decline in the near future.

Thus, a break below 207.50 will extend the recent decline and prices may soon retreat to 204.50-201.50. Otherwise, a rise to 215.50-217.50 could attract selling pressure.

Alternatively, huge resistance is seen on the upside at 220.50, a break above prices alone could witness a recovery to 223.50-226.20.

Commodity Samachar
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