SMM Nickel Price Forecast (Jul.30-Aug.3)

SHANGHAI, Jul. 30 (SMM) –

Positive Factors
1. Due to declining expectation of QE3 implementation, the US dollar index plunged on Thursday to an intraday low of 82.59.
2. ECB President Mario Draghi said the ECB will protect the euro by many measures, including curbing irrational government bond yields. In response, non-US dollar currencies surged on Thursday and the Dow Jones Industrial Average rose by over 200 points.
3. The annual growth rate of China's industrial profit margins during 1H 2012 was down 2.2%, another sign of China's slowing economy.

Negative Factors:
1. The Chinese RMB has weakened against the US dollar, to a medium exchange rate of 6.3429 on July 25th, the lowest level during 1H 2012. The RMB fell against the US dollar by nearly 1% last week, and many expect the RMB to depreciate further. The attraction of China's financial market to foreign capital is waning due to RMB depreciation and slower economic growth, so capital is expected to flow out from China during 2H 2012. LME nickel prices rebounded last week, but spot prices resisted increases, and these conditions will continue if the RMB continues to depreciate.

2. The Shanghai Composite Index plunged to a record low for the year of 2124.16.

In general, economic and political news has been mixed, and whether the European debt crisis will be resolved and future US economic data are now the focus of markets. A sluggish US economy will continue to weigh down LME nickel prices unless QE3 policies are implemented. In the coming week, LME nickel prices are expected to fluctuate weakly.