SMM Evening Comments (Aug 1)

SHANGHAI, Aug 1 (SMM) – SHFE nonferrous metals fell for the most part with lead remaining the poorest performer and dipping 1.4%. Zinc slid 1.3%, copper fell 0.5%, aluminium shed 0.4%, while nickel gained 0.1%, and tin grew 0.2%. 

The ferrous complex also traded lower as iron ore lost 3.6%, coke slipped 2.1%, rebar eased 1.6%, hot-rolled coil dropped 0.9%, and coking coal went down 0.7%. 

Copper: The most-liquid SHFE September contract regained some losses after it slid to an intraday low of 46,540 yuan/mt right after opening. A lack of confidence in the market prevented it from exceeding 46,680 yuan/mt at noon, and settled it at 46,620 yuan/mt, down 0.49% on the day. Copper prices remained under pressure from a high US dollar, as the US Federal Reserve Chairman said the first interest rate cut since 2008 was not the start of a long easing cycle. The September contract lost support from the Bollinger middle band and from all moving averages. With bearish signals from technical indicators, the contract may struggle to stay above the 46,500 yuan/mt level tonight.

Zinc: The most-liquid SHFE September contract extended overnight declines as it fell to a low of 19,235 yuan/mt after it unsuccessfully tested pressure from the 10-day moving average. It finished the trading day 1.28% lower at 19,265 yuan/mt, with open interests down 21,580 lots to 213,000 lots. The market again looked at fundamentals after the US Fed lowered interest rates by the expected 25 basis points. High temperatures continued to deter downstream consumption and fuel bearishness. Tonight, the contract is expected to trade weakly around the 20-day moving average. 

Nickel: Exiting longs sent the most-liquid SHFE October contract to an intraday low of 111,810 yuan/mt before noon, but with support from the five-day moving average, the contract regained losses and climbed 0.1% on the day to finish at 112,590 yuan/mt. Open interests lost 1,686 lots to 371,000 lots. The contract is likely to hover between 112,000-114,000 yuan/mt tonight. 

Lead: Intensified bearish sentiment continued to weigh on the most-active SHFE September contract, which slipped to an intraday low of 16,360 yuan/mt and lost 1.35% on the day to end at 16,385 yuan/mt. Open interests shrank 3,566 lots on the day to 60,162 lots. The second consecutive trading day of decline was accounted for by departing longs. However, limited downside room is expected given support from the 20-day moving average. Tonight, the contract is expected to trade between the 10- and 20- day moving averages. 

Tin: The most-liquid SHFE September contract came off from a high of 135,390 yuan/mt as longs followed shorts to exit the market. The contract closed the trading day 0.17% higher at 134,330 yuan/mt, with pressure from the five- and 20- day moving average. Support is seen from 134,000 yuan/mt with resistance from 135,600 yuan/mt tonight.