GENERAL MARKET CONDITIONS

The earthquake in China should result in greater demand for base metals as the counties which are affected will need to restore power and other essential supplies. At the beginning of the year China experienced the worst snowfall in over fifty years and now the earthquake. This time around the damage was less as population density in affected areas was less. Once the actual damage to the Chinese infrastructure is known, it will be easy to identify incremental demand for base metals from China. Aluminum and steel will get the maximum boost due to demand from power transmission and construction sectors. Other base metal demand will rise but not as much.

The US dollar has weakened ahead of the April retail sales numbers. The cable has gained and pared some of its losses but is still not out of the woods. Expectations that the inflation factor will prevent the bank of England from cutting interest rates in the future is supporting the UK currency from a sell off. It needs to close over 1.9607 against the greenback on Friday to be in a medium term bullish zone. A close below 1.9607 on Friday will result in 1.9176 over the next few months. The Bank of England was the first central bank (among developed nations) to start raising interest rates in 2006 and is also the first central bank (after the federal reserve) to start cutting interest rates. The Bank of England has always acted fast to balance inflation and growth as opposed to other central bankers which are biased on either side. As a result the sterling has always moved in one direction for a few months and changes the direction. If one is able to identify the direction, it is one of the easiest currencies to trade.

COPPER -- JULY FUTURE

As long as $359 holds in the short term downside will be limited and copper can target $397 and $407. A consolidated fall below $359 will result in short term bear phase to $330.

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