Zinc settled down -0.28% at 126.15 on profit booking while still prices capped the longest rally since February amid speculation that strengthening economies from the U.S. to Europe will buoy metals demand. Improving global demand prospects have helped to support prices for zinc and aluminium in particular, led by stronger-than-expected consumption and tight supply, and bolstered by continued monetary easing by central banks. Lastweek Zinc closed almost 2% up last week as demand is on the rise. LME inventories dropped more than 35% year-to-date, while global markets recorded a 17,000 deficit in 2013, according to the ILSZG report. Also Chinese zinc demand is seen growing by 8 percent this year, the fastest since 2010, driven by auto sales. This is expected to push the market into a deficit for the first time in several years. LME zinc prices opened at USD 2,137/mt overnight, then hovered between USD 2,110-2,140/mt. China's inflation rate in May was positive, but little boosted market sentiment. Besides, the US dollar index closed with gains for three consecutive days, weighing down base metals prices. LME zinc prices once dipped to as low as USD 2,107.8/mt, but found strong support from the 5-day moving average, and closing at USD 2,133/mt, down USD 3.5/mt. While UK's April unemployment rate to be released today is expected to be positive, but a rising US dollar index will push down base metals prices. Technically market is under fresh selling as market has witnessed gain in open interest by 0.08% to settled at 2430 while prices down -0.35 rupee, now Zinc is getting support at 125.3 and below same could see a test of 124.3 level, And resistance is now likely to be seen at 127, a move above could see prices testing 127.7.

Trading Ideas:

Zinc trading range for the day is 124.3-127.7.

Zinc dropped on profit booking after price seen supported led by stronger-than-expected consumption and tight supply.

Chinese zinc demand is seen growing by 8 percent this year, the fastest since 2010, driven by auto sales.

Zinc daily stocks at Shanghai exchange came down by 26 tonnes.