SMM Evening Comments (Aug 21)

Published: Aug 21, 2018 17:50

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SMM Evening Comments

SHANGHAI, Aug 21 (SMM) – Nonferrous metals futures continued their increases for the most part, with SHFE zinc leading gains and closing over 3% higher. Aluminium grew nearly 2%, copper and nickel rose nearly 1.2%, lead gained 0.72%, while tin edged down.

The ferrous complex mostly weakened. Coke lost over 3.5%, iron ore slid nearly 2%, coking coal fell over 1.5%, rebar lost 0.18%, while hot-rolled coil closed 0.82% higher.

Copper: A stronger LME copper pulled the SHFE 1810 contract to a high of 48,730 yuan/mt in the afternoon as the US dollar weakened to around 95.5. The contract received support at the five-day moving average and closed at 48,700 yuan/mt, up 620 yuan/mt from Monday. An optimistic outlook on US-China trade talks will provide some support to copper prices in the short run. We see the contract testing support at 48,500 yuan/mt tonight. On Monday, the US trade representative's office began six days of public hearings on US President Donald Trump's plans to impose taxes on an additional $200 billion worth of Chinese goods. Investors would take more guidance tonight from the minutes of the August monetary policy meetings othe Reserve Bank of Australia, as well as prices of LME copper.

Aluminium: As overseas shortages of alumina grew confidence in long positions, the SHFE 1810 contract tested the 14,685 yuan/mt level twice in the morning. As longs continued to surge in the afternoon, it jumped to a high of 14,740 yuan/mt, and closed at 14,705 yuan/mt. Open interests gained 20,802 lots, to 284,000 lots. The contract regained losses from last Thursday, and may test support at the five-day moving average tonight.

Zinc: The SHFE 1810 contract stood firm above 20,000 yuan/mt as shorts exited in the afternoon. It gained 475 yuan/mt from Monday and closed at 20,580 yuan/mt, with open interests down 9,604 lots to 216,000 lots. As the MACD green line shortened, the contract is likely to extend its robust trend tonight.

Nickel: The SHFE 1811 contract received support at the 40-day moving average and increased to a high of 112,980 yuan/mt in the afternoon amid improved fundamentals. It jumped 1,350 yuan/mt from Monday and closed at 112,830 yuan/mt. Resistance above is at the 113,000 yuan/mt level. As the KDJ indicators expanded upward and MACD green line shortened, we expect the contract to hover around 112,500 yuan/mt tonight.

Lead: The SHFE 1810 contract rebounded to close 0.72% higher at 17,550 yuan/mt today after it touched an intraday low of 17,320 yuan/mt. The rebound was buoyed by the broad-based increases in SHFE nonferrous metals in the afternoon. We expect the contract to test pressure at the five-day moving average tonight. Investors should monitor the market as US tariffs on $16 billion of Chinese goods take effect on Thursday.

Tin: The SHFE 1901 contract reversed most of its early losses and closed at 144,940 yuan/mt today after it initially fell to an intraday low of 142,500 yuan/mt. We expect the contract to remain under pressure in the short term. We see technical resistance at 146,500 yuan/mt and support at 142,500 yuan/mt.

Evening comments Futures movement

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