LME Zinc – Favorable Macro Environment Fueling Upside

LME Zinc price continued its strong upward momentum on Thursday, March 4th. The 3-month benchmark broke above its immediate resistance level of $2,590 - 2,600/mt, forming an obvious inverse head and shoulder pattern. This price strength was driven by renewed optimism regarding China’s economic recovery, supported by stronger-than-expected Chinese manufacturing PMI data.

In Europe, lower-than-expected CPI and recent dovish remarks from ECB officials regarding potential rate cuts as early as June bolstered market sentiment, raising hopes for earlier rate cuts in the U.S. as well.

Additionally, concerns over zinc concentrate shortages have further supported the LME zinc price, with several mine closures observed and leading to higher chances of output cuts by smelters in the coming months.

That said, the recent release by ILZSG indicating a global refined zinc surplus of 58,700mt in January 2024, combined with persistently weak demand from downstream sectors, may act as a potential roadblock for LME zinc to push further above its December 2023 high.

While fundamentals may be weak now, the mix of positive macro factors and the formation of an inverse head and shoulder pattern in the current technical configuration suggests a potential test towards the it’s key resistance level at $2,675 (in which it has failed to breakthrough in the previous attempts).

Further economic data releases suggesting earlier Fed’s rate cut may act as a catalyst to continue fueling upward momentum in LME zinc price.

TR&A - [Chart of the Day]

Please note that the information provided is solely our opinion and for informational purposes only. It does not constitute trading advice or advocacy. Readers are encouraged to conduct their own research and consult with financial professionals before making any investment decisions.