Zinc settled down -0.8% on profit booking after prices climbed to a four-week high earlier this week driven by momentum-based speculators and computer-driven funds while pressure seen yesterday as inventory levels remain still high. Zinc has probably one of the biggest exposures to residential construction activity of any of the metals, and Chinese refined zinc production surging quite sharply since June. While investors are betting on shortages developing due to mine closures, inventories of zinc in LME-approved warehouses are giving the opposite signal, having surged by 13 percent over the last month to 739,400 tonnes. Meanwhile data released earlier in the week showed that factory growth in China slowed last month, indicating a recovery in the broader economy remains fragile and may need further government stimulus. China’s official manufacturing index ticked down to 51.1 from 51.7 in July, while the HSBC manufacturing index slowed to 50.2 from 50.3 the previous month. Investors were looking ahead to the latest U.S. employment report, due for release on Friday, for further indications on the strength of the recovery in the labor market, a key factor in deciding the future path of monetary policy. Expectations that the Federal Reserve is growing closer to raising interest rates have boosted the dollar against the euro and the yen, as the European and Japanese central banks look likely to stick to a looser monetary policy stance. Market players are also awaiting the ECB meeting on Thursday amid mounting expectations that the central bank will announce quantitative easing measures as a way to shore up growth and stave off deflation. Technically market is under long liquidation and getting support at 142.7 and below same could see a test of 142.1 level, And resistance is now likely to be seen at 144.3, a move above could see prices testing 145.3.

Trading Ideas:

Zinc trading range for the day is 142.1-145.3.

Zinc dropped on profit booking a rising US dollar index kept investors cautious despite US July factory orders grew most significantly since 1992.

Although Russia and Ukraine reached a cease-fire agreement and US factory orders were positive in July weighing on prices.

Zinc daily stocks at Shanghai exchange came down by 249 tonnes.