Zinc highlights

摘要

Zinc prices have struggled to maintain the uptrend that started off the early February low. High export data from China, the resumption of net inflows into LME warehouses in Asia, and talk of ample new mine capacity coming on stream have meant that the market continues to lack the bullish fundamental impetus to outweigh the lingering bearish technical setting. This has been a key factor in preventing prices from recovering as strongly as we had predicted. Technically, a short-term head-and-shoulders pattern has been developing since early February, and this projects back to the recent lows at 3,050 dollars/tonne. However, there is also a much larger head-and-shoulders pattern, which could mean technical traders maintain a bearish medium-term position no matter how their near-term strategy plays out. This could cap zinc prices for some months yet. The last six weeks trading can be interpreted as starting to form the right shoulder of the pattern, the November-December 2006 peak at 4,500 dollars/tonne is the head and the May 2006 peak at 3,800 dollars/tonne is the left shoulder. If this pattern plays out according to the technical bears' script, we could be looking at a move to 2,000 dollars/tonne in the first instance and ultimately something closer to 1,200 dollars/tonne. While the market continues to struggle to find upward traction, the better the chart forms the right shoulder and the more confident in achieving their downside objectives the bears will become.