Zinc settled at 124.90 recovered from the morning sessions drop as support after positive economic data from China boosted Chinese shares as well as LME zinc prices. The US dollar index closed with gains over three consecutive days last week, however, which pushed down LME zinc prices. But Euro zone and European GDP reports were upbeat, and since US July PPI fell short of expectations, the likelihood the US Fed would taper its QE3 programs anytime soon was diminishing, which sent LME zinc prices back up to USD 1,960/mt. The falling US dollar index also supported zinc prices. Also smelters were actively selling goods after spot zinc prices broke through RMB 15,000/mt. Traders were also willing to move goods, but purchasing activity was weak. Nevertheless, narrowing spot premiums and low zinc prices induced some buyers to enter the market, causing transactions to improve, but downstream buying interest still remained low. Spot premiums in Shanghai narrowed sharply, and even turned to discounts last Friday, causing the price spread between Guangdong province and Shanghai to contract to RMB 100/mt. Supply in Guangdong province remained tight, but did not fall significantly short of demand. Supply in Tianjin was also adequate since some smelters restarted production and demand weakened slightly. The market should lack solid macroeconomic news this week, but the Federal Reserve Bank of Chicago's July activity index and US July existing home sales will be released, with positive data increasing the likelihood of an end to QE3 and weighing on zinc prices. Germany's July PPI will also be announced, which will also affect zinc prices. Technically market is getting support at 123.1 and below same could see a test of 121.1 level, And resistance is now likely to be seen at 126.4, a move above could see prices testing 127.7.

Trading Ideas:

Zinc trading range for the day is 121.1-127.7.

Zinc ended with flat node as gains was limited due to lack of important reports

U. S. data on initial jobless claims and the housing sector later in the week will also be closely watched.

US Fed may announce wind-down of QE3 during its policy meeting due in mid-to-late September, keeping investors cautious.