SHANGHAI, Dec. 20 (SMM) –LME copper will see greater volatility next week, rising initially before falling back later. 
Trading activity on the LME will wane as Christmas holiday is just days away. The US dollar index is expected to climb to 98.2-99.38 on recovering US housing market. LME copper should swing wildly between $4,540-4,670/mt. 

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Cross-border capital continued flowing out of China. According to the State Administration of Foreign Exchange, China’s foreign exchange settlement/surrendering deficit expanded to RMB 349 billion or USD 54.8 billion in November from RMB 127.9 billion or USD 20.1 billion in October. In response to growing pressure of capital outflows, the People’s Bank of China (PBOC) will take further action, such as RRR and interest rate cuts and open market operations, to ensure sufficient liquidity in domestic market. It was reported that the PBOC will inject a net RMB 30 billion into the open market this week.  

Markets are hoping for favorable policies from China’s Central Economic Work Conference held last Friday. With the year coming to an end soon, this week is likely to be the last period of brisk trading in commodity market before the new year begins. Chinese copper smelters gathered recently to discuss measures to cope with falling copper prices, and this should lend support to copper prices. But risk aversion before the Christmas holiday will keep investors cautious. SHFE 1602 copper is expected to move between RMB 35,000-36,200/mt, challenging resistance at the 40-day moving average.  

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