Zinc settled up 1.21% at 129.20 rose to a three-week high on Monday, amid speculation demand from top consumer China will increase after data pointed to an improvement in Chinese credit growth. In China, the People’s Bank of China (PBOC) drained RMB 48 billion from markets through the 14-day repurchase agreement, which is the first time in 8 months and may be related to the country’s enormous lending in January. The Ministry of Commerce reported that actual direct foreign investments totaled USD 10.763 billion in January, up 16.11% YoY and far exceeding market forecasts for a 2.5% rise. This phenomenon suggests that global hot money is flowing in China at a faster pace. Despite ongoing concern regarding the implication of sequential weakness in macroeconomic manufacturing leading indicators, signals from base metals markets in terms of LME stocks, time spreads and Chinese trade data all paint a far more constructive picture of underlying fundamental conditions. According to Barclays, much of the focus on base metals so far in 2014 has regarded the evolving macro-level risks that could convert into negative micro demand effects on the complex. However, base metals prices have held up well despite this macro duress, which, in our view, reflects in part the continued signs of tightening at a physical market level, the firm added. Technically market is under fresh buying as market has witnessed gain in open interest by 4.55% to settled at 3450 while prices up 1.55 rupee, now Zinc is getting support at 128.1 and below same could see a test of 126.8 level, And resistance is now likely to be seen at 130, a move above could see prices testing 130.6.

Trading Ideas:

Zinc trading range for the day is 126.8-130.6.

Zinc gained as declining US dollar index offset pressure from China’s restart of repurchase agreement and disappointing economic data from euro

US NAHB housing market index plunged to 46 in February, well below the 56 expected, a sign that home builders were not optimistic about US housing market.

Zinc daily stocks at Shanghai exchange came up by 750 tonnes