SHANGHAI, Feb. 27 (SMM) -- The European Commission cut the 2012 euro zone GDP forecast on Thursday and warned of the possibility of the euro zone slipping back in a second recession. According to European Commission, sovereign debt issues, weak financial markets, and sluggish real economies will not improve significantly in the short term. Although Greece received a second round bailout, its economy will inevitably contract under the new austerity conditions. Nevertheless, the Greek bailout will highlight the EU's resolve toward the Greek crisis and its capability to handle other issues. LME nickel prices were supported by a rising Shanghai Composite Index and demand for nickel is expected to increase despite a slow recovery following the Chinese New Year holiday.
Technically speaking, the current RSI suggests LME nickel prices are in a selling zone, with LME nickel prices between the 5-day and 10-day moving averages, with close attention needing paid to movements of 5-day and 10-day moving averages. If the 10-day moving average is significantly higher than 5-day moving average, LME nickel prices should rise in the short term. Otherwise, LME nickel prices will meet resistance in advancing further. The weekly chart indicates fierce competition between longs and shorts, but also indicates a reverse signal, with LME nickel prices expected to rebound on positive news.
In general, LME nickel prices continue to will fluctuate since the euro zone economy will remain weak for the foreseeable future and as no significant negative news is expected to release from the euro zone in the short term. LME nickel prices only react to technical indicators, or any improvements in demand and transactions.
At present, the spread between domestic nickel prices and converted LME nickel prices is expanding, but if LME nickel prices increase in the coming week, demand for domestic nickel will increase and spot nickel prices will grow faster than LME nickel prices. If LME prices do not rise, however, Jinchuan Group will cut ex-works nickel prices, driving down spot nickel prices down, but slower than LME nickel price declines.