SMM Evening Comments (Jul 26)

SHANGHAI, Jul 26 (SMM) – Both SHFE nonferrous metals and the ferrous complex closed mixed on Thursday July 26.

Zinc slid 0.79%, aluminium dipped while copper, lead, tin and nickel nudged up. Rebar, hot-rolled coil and coke edged up while coking coal and iron ore slipped.

Copper: The SHFE 1809 contract opened higher this morning but initially fell as speculative longs covered their positions. The contract extended its losses in the afternoon trading session  as shorts added their positions. Before closing, it recovered some losses as shorts took profits and covered their positions. We expect the contract to weaken tonight as its LME counterpart lost all its early gains after European trading hours began. The market can take some cues from the European central bank's meeting, the US durable goods orders and wholesale inventories last month as well as initial jobless claims last week.

Aluminium: The SHFE 1809 contract failed to break pressure at 14,350 yuan/mt after it dipped from a high of 14,355 yuan/mt in the morning. It hovered above its daily moving average, and closed at 14,330 yuan/mt, down 70 yuan/mt from Wednesday. Open interests for SHFE front-month contracts 1808 and 1809 lost over 7,000 lots, while that for later month contracts 1810 and 1811 rose more than 5,000 lots. The 1809 contract is likely to test resistance at 14,350 yuan/mt level tonight.

Zinc: The SHFE 1809 contract recovered some losses after it found some support at 21,195 yuan/mt and managed to stand firmly above the five-day moving average during the day. We expect the contract to test the support at 21,200 yuan/mt tonight given the weak performance of its LME counterpart during European trading hours.

Nickel: The SHFE 1809 contract initially climbed to a high of 111,560 yuan/mt before it fell to its daily moving average in the morning. It deepened its losses in the afternoon but recovered some before close. Resistance was at the 20-day moving average while support was at the five-day moving average. Technically, KDJ lines expanded upwards and diverged while the MACD green line shortened. We expect the contract to hover around 111,000 yuan/mt tonight.

Lead: The SHFE 1809 contract strengthened during the day and hit an intraday high of 18,835 yuan/mt before close. Its five- and 10-day moving averages shaped a golden cross while pressure at the 20-day moving average was strong. We expect the contract to hover between the 10- and 20-day moving averages tonight.

Tin: The SHFE 1809 contract hovered at 145,380-145,500 yuan/mt under the pressure at the daily moving average during the day. We see its upward momentum fading and expect it to struggle around 145,500 yuan/mt tonight.