Nickel Bounced Off Its Weakest Level

Nickel bounced off its weakest level in nearly a year on short covering tracking LME prices after prices dropped pressured by weaker iron ore and oil prices. Nickel declined for a third straight month in May and has tumbled 13 percent this year, the biggest drop among major base metals. Base metals demand in China, the top consumer of industrial metals, is expected to taper off in the second half of the year.

Both zinc and nickel are used in the steel industry so are sensitive to iron ore and steel prices while oil is a key input in mining. U.S. job growth slowed in May and employment gains in the prior two months were not as strong as previously reported, suggesting the labor market was losing momentum despite the unemployment rate falling to a 16-year low of 4.3 percent.

Nonfarm payrolls increased 138,000 last month as the manufacturing, government and retail sectors lost jobs, the Labor Department said. The economy created 66,000 fewer jobs than previously reported in March and April. Last month's job gains could still be sufficient for the Federal Reserve to raise interest rates at its June 13-14 policy meeting. The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

While Nickel inventories at LME warehouses remain at elevated levels even though they were well below their 2015 peak. At more than 378,000 tonnes, stocks are equivalent almost 20 percent of global consumption, estimated at nearly 2 million tonnes this year. Technically now Nickel is getting support at 566.9 and below same could see a test of 559.6 level, And resistance is now likely to be seen at 578.1, a move above could see prices testing 582.

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Suhani Verma

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