SMM Evening Comments (Jun 1)

Published: Jun 1, 2018 18:11

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SMM Evening Comments

SHANGHAI, Jun 1 (SMM) – Most nonferrous metals weakened on Friday June 1. SHFE lead fell 0.7%, and tin, zinc and aluminium dipped. SHFE nickel gained 2.1% and hit a record high. SHFE copper inched up.

The ferrous complex rose across the board except for iron ore. Coking coal surged over 2%, rebar gained 1.7%, and hot-rolled coil and coke climbed slightly.

Copper: As longs added their positions, the SHFE 1807 contract hit a high of 51,490 yuan/mt. It then hovered around the 51,430 yuan/mt level within a range of about 40 yuan/mt after it fell to a low of 51,320 yuan/mt with resistance at the 51,500 yuan/mt level. Dragged by its LME counterpart, the contract then fell to the daily moving average at noon and touched a low of 51,300 yuan/mt. It climbed to a high of 51,320 yuan/mt before closure as shorts closed out their positions. SHFE copper traded above the daily moving average for the most of the day with support at the 51,300 yuan/mt level. Technically, it now struggles among several moving averages with the KDJ converging. We expect it to continue its rangebound pattern tonight.

Aluminium: The SHFE 1807 contract dipped to a low of 14,580 yuan/mt with pressure from shorts today. As the price of alumina is likely to fall in the near term, the contract is set to see its trading range move downwards. It is likely to trade between the 40- and 20-day moving averages tonight with limited support in the short term.

Zinc: The SHFE 1807 contract initially jumped to a high of 24,390 yuan/mt. It then lost all the gains and fell to test the strength at the 60-day moving average as longs closed out their positions and fled. The contract regained some losses before closure as some shorts left the market. Technically, we see upward room for it. The decline in social inventories across Shanghai, Guangdong and Tianjin will also give support to the prices of futures. Its weaker LME counterpart, however, eroded some of its upward momentum. Investors are keen to wait and watch. We expect the contract to try to stand firmly above the 60-day moving average tonight.

Nickel: The SHFE 1807 contract soared to a three-year’s high of 120,000 yuan/mt on bullish sentiment due to robust downstream consumption of stainless steel and eased tension from the US-Sino trade conflict. As the KDJ indicators barely diverged from each other and longer-term moving average of the MACD lengthened, the contract is expected to hover at highs tonight. Investors will take more cues from the US unemployment rate, and its employment change in the private sectors in May.

Lead: The SHFE 1807 contract initially hovered around the daily moving average within a range of 70 yuan/mt. It then fell, suppressed by shorts, and touched a low of 19,700 yuan/mt. Longs dragged it up above the 10-day moving average before closure. We expect it to test the support at the 10-day moving average tonight.

Tin: The SHFE 1809 contract fell during the day after initially hitting a high of 156,500 yuan/mt. In the short term, we see strong resistance for the contact to extend its gain. Investors should watch out for SHFE tin coming off from highs.

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Evening comments Futures movement

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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