Base Metals Face Volatile Session

NEW YORK (TheStreet) -- Base metals are likely to open lower Tuesday on expectations of negative economic data.

But they could recover from any losses if the euro continues to show strength against the dollar.

Economic data releases lined up for Tuesday include U.S. Consumer Confidence for July, which is expected to come in at 51, lower than 52.9 recorded in the earlier month as the labor market remains weak.

Also, the Richmond Fed's Manufacturing Index is estimated to come in at 11 for July, significantly weaker than the reading of 23 for June.

Copper

Copper for delivery within three months dropped almost 1% to $7,077 on the London Metal Exchange (LME) in early hours of trading after closing at its 10-week high on Monday. Copper inventories maintained by the LME declined 0.8% to close at 416,275 tonnes Monday. Copper faces support at $7,075 and resistance at $7,115.

The metal was helped Monday by a rally in equity markets and Monday's report that U.S. new-home sales improved. However, after accumulating excess gains and crossing the $7,100 resistance level at the LME, copper prices dropped in the early hours Tuesday.

Reuters reported that as smelters profitably worked near full steam, refined copper output in China increased 26.3% year over year in June to reach an all-time high of 422,000 tonnes. The earlier record stood at 420,700 tonnes in November 2009. However, in the second half of the year refined copper production might slow as it largely depends on Beijing's macroeconomic policies, which affect smelter material imports.

Major copper producers are trading very close to their resistance levels. Southern Copper ( SCCO) which closed at $32.14 in the previous trading session has support at $31.69, while resistance lies at $32.52. Meanwhile, Freeport-McMoRan Copper & Gold ( FCX) closed at $71.24 with support and resistance at $70.26 and $72.01, respectively.

Aluminum

Aluminum for delivery within three months edged down 0.4% at $2,047 per ton in the early hours of trading on the LME. Inventories maintained by the LME decreased by 5,325 tonnes to 4.40 million tonnes on Monday. Aluminum is seen trading sideways with support and resistance at $2,041 and $2,061 respectively.

Meanwhile, it is highly likely that today Alcoa ( AA) might sell $1 billion of notes in its biggest offering in two years. The proceeds would be used to repay outstanding debt.

Alcoa ended trading at $11.23, close to its resistance of $11.40, after which is technically seen to be crossing $11.56. Its support lies at $11.04. Century Aluminum ( CENX) closed at $10.78 with support and resistance at $10.52 and $11.09, respectively. Kaiser Aluminum ( KALU) closed at $41.26 with support at $40.65 and resistance at $41.61.

Nickel

Nickel for delivery within three months declined 1% to $20,601 per ton in the early hours of trading on LME. Nickel inventories maintained by LME were down 0.5% to settle at 116,262 tonnes Monday. Nickel is expected to trade sideways and faces support at $20,547, while resistance lies at $20,793.

As per World Bureau of Metal Statistics estimates, refined nickel was trading in marginal deficit of 5,000 tonnes during the January to May 2010 period as compared to a surplus of 48,600 tonnes in the same period a year ago.

Zinc

Zinc for delivery within three months fell 0.9% to $1,937 per ton in early hours of trading on the LME. Zinc stockpiles shed 175 tonnes to close at 620,600 tonnes. Zinc has support at $1,931 and resistance at $1,949.

Lead

Lead inched up 0.2% to $2,018 per ton in the early hours of trading on the LME. At the end of Monday's trading, lead inventories fell by 425 tonnes to 182,800 tonnes. Lead faces support at $2,003 and resistance at $2,020.

Karvy Global Services (www.karvyglobal.com), a subsidiary of the Karvy group (www.karvy.com), provides specialized research in asset classes including stocks, mutual funds and insurance to leading Wall Street firms.

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