SMM Morning Comments (Jul 27)

SHANGHAI, Jul 27 (SMM) – 

Copper: As the US dollar increased, LME copper edged down to close at $6,281.5/mt with open interests dipping 2,143 lots 309,000 lots. Uncertainties from the macroeconomy remain as the market worries about changes in the global trade patterns. We see LME copper trading at $6,240-6,300/mt with the SHFE 1809 contract at 49,800-50,300 yuan/mt today. Spot discounts are likely to deepen further to 100-60 yuan/mt.

Aluminium: LME aluminium faced pressure at the 20-day moving average during the European trading session as the US dollar strengthened. With support at the 10-day moving average, it closed at $2,068/mt after dipping to a low of $2,053/mt, with LME inventory down 1,625 mt to 1,207,600 mt. It is expected to trade rangebound at $2,052-2,080/mt today. As SHFE base metals gained across the board overnight, the September aluminium contract jumped to a high of 14,385 yuan/mt with support at the five- and 40-day moving averages. Its trading range today is set at 14,300-14,450 yuan/mt, with spot discounts at 120-80 yuan/mt. 

Zinc: LME zinc received support at the daily moving average after tumbling to a low of $2,560/mt. However, it failed to break resistance twice at $2,600/mt. It gained $8.5/mt from Wednesday and closed at $2,592.5/mt, with possible trading range at $2,565-2,615/mt today. The SHFE 1809 contract stood firm at highs and climbed up to 21,470 yuan/mt as shorts exited. It is seen trading at 21,200-21,700 yuan/mt today. 

Nickel: LME nickel rebounded from a low of $13,605/mt with support at the five-day moving average. While climbing to a high of $13,800/mt, it closed at $13,780/mt with LME inventory reducing 1,068 mt to 259,332 mt. The SHFE 1809 contract was buoyed by rising longs to around 112,230 yuan/mt. Open interests went up 10,512 lots to 279,000 lots. Amid eased sentiment over a trade war, LME nickel is forecast to trade at $13,600-13,800/mt today, and the SHFE 1809 contract at 111,000-112,500 yuan/mt. Spot prices are seen at 110,500-112,500 yuan/mt. 

Lead: LME lead recovered some losses before close on Thursday. We see limited upward momentum for it and expect it to test pressure at the five-day moving average today. The SHFE 1809 contract climbed to 18,930 yuan/mt after it consolidated around 18,800 yuan/mt overnight. We see an upward track open. However, corrections after consecutive increases are also likely after the market fully digested this round of fiscal stimulus from the Chinese government. 

Tin: LME tin failed to extend its gains on Thursday and is expected to remain rangebound in the short term with resistance at $20,100/mt. The SHFE 1809 contract continued to trade rangebound overnight. We see limited upward momentum for it given its rangebound LME counterpart and slow de-stocking pace in China. We expect the contract to continue to consolidate in the short term with resistance at 147,000 yuan/mt.