Zinc settled down -0.48% at 125.25 as US dollar index continued to rise weighing down LME zinc prices to $1,960/mt. German Q2 GDP was in line with market expectations, which allowed LME zinc prices to rally soaring to $1,980/mt. While US new home sales in July were 394,000 units, falling short of expectations, so speculations that the Fed will begin scaling back QE3 soon decreased. The US dollar index dropped, while European stocks closed the day with gains. LME zinc prices gained ground and touched $1,987.3/mt, closing at $1,987.3/mt, up $17.3/mt or 0.88%. Expectations that the Fed will slow tapering QE3 grew. US new home sales in July dropped by 13% MoM to 394,000 units, the lowest since October 2012, and the largest decline in three years. That is because of rising mortgage loan rate, and the market expects the Fed will not announce quitting QE3 at its meeting in September. Meanwhile, market players hoped the Fed will reconsider the tapering of QE3 at the Jackson Hole central bank meeting, boosting investor optimism. European economic data was positive. German seasonally adjusted Q2 GDP was 0.7%, in line with market expectations; the revised annualized UK Q2 GDP was 1.5%, higher than expectations and Q1; the preliminary CCI in 17 European countries in August was -15.6, the highest since July 2011, keeping the euro against the US dollar strong. Technically market is under long liquidation as market has witnessed drop in open interest by -3.14% to settled at 3146 while prices down -0.6 rupee, now Zinc is getting support at 124.8 and below same could see a test of 124.3 level, And resistance is now likely to be seen at 125.9, a move above could see prices testing 126.5.

Trading Ideas:

Zinc trading range for the day is 124.3-126.5.

Zinc settled flat as US dollar index continued to rise after prices got support as German Q2 GDP was in line with market expectations

Sentiment has been supported last week by data showing a rebound in Chinese manufacturing, as well as upbeat manufacturing numbers from US.

US new home sales in July falling short of expectations, so speculations that the Fed will begin scaling back QE3 soon decreased