SMM Morning Comments (Jun 5)

SHANGHAI, Jun 5 (SMM) –

Copper: As the US dollar further weakened on growing possibility of an US interest rate cut, London copper longs aggressively loaded up their positions, bolstering the three-month contract from earlier lows to end 0.46% up at $5,894.5/mt on Tuesday. The most active SHFE July contract rapidly climbed to a high of 46,590 yuan/mt overnight, driven by a short-covering. It finished overnight session 0.52% higher at 46,530 yuan/mt. Copper prices remain under pressure from the safe-haven US dollar amid lingering risk aversion, while technical levels might offer some support. LME copper is expected to trade between $5,850-5,900/mt today, with its SHFE counterpart at 46,300-46,700 yuan/mt. Risk aversion sentiment is likely to shore up spot premiums to 90-150 yuan/mt, but to weaken trading enthusiasm and cap upside room in spot premiums.

Aluminium: The weaker greenback boosted three-month LME aluminium on Tuesday, which gained 0.62% to close at $1,785/mt. The loading up of long positions primarily accounted for the gains. LME aluminium is expected to trade between $1,760-1,810/mt today. The liquidation of close to 3,000 lots of short positions helped the most traded SHFE July contract to recover from earlier losses overnight before it ended marginally lower at 14,070 yuan/mt. The contract faces resistance from the cross-over of the five- and 40-day moving averages. It is expected to trade rangebound between 14,000-14,200 yuan/mt today, with spot premiums of 10-30 yuan/mt over the June contract.

Zinc: Three-month LME zinc rebounded from an intraday low of $2,448/mt to an intraday high of $2,508.5/mt on Tuesday before it erased those gains to finish the trading day lower at $2,473/mt. Over 15,000 mt of LME zinc warrants were cancelled on the day. This, together with stronger expectations of a cut in US interest rate, bolstered LME zinc yesterday. But resistance remained strong at $2,500/mt. LME zinc is expected to trade between $2,465-2,515/mt today. The most active SHFE July contract traded rangebound to close overnight at 20,265 yuan/mt. Recent losses drove its KDJ lines to expand downwards, suggesting limited steam in SHFE zinc. This, together with the weak spot market, is likely to cause SHFE zinc to underperform its LME counterpart. SHFE zinc is expected to trade between 20,200-20,700 yuan/mt today.

Nickel: Three-month LME nickel fell for a third straight day on Tuesday, losing 0.67% on the day to close at $11,800/mt. The SHFE July contract also continued to weaken overnight, touching a low of 95,830 yuan/mt before it ended the session 0.71% lower. LME nickel is expected to trade between $11,750-11,900/mt today, with SHFE nickel at 95,500-97,000 yuan/mt. Spot prices are seen at 96,600-97,500 yuan/mt.

Lead: Three-month LME lead on Tuesday broke through the 20-day moving average to a high of $1,853/mt, near the high end of its recent trading range, before it closed 1.76% higher at $1,845.5/mt. LME lead might pull back if it fails to register more substantial gains to move out of its current range soon. Bolstered by its stronger LME counterpart, the most active SHFE July contract opened higher overnight, but fell to a low of 15,935 yuan/mt before it rebounded to close 0.69% higher at 16,045 yuan/mt. SHFE lead might continue to follow its strong LME counterpart to extend overnight gains today, but it faces the possibility of a buildup of short positions at highs.

Tin: Lower crude oil prices depressed three-month LME tin to an intraday low of $18,825/mt on Tuesday, before the contract recovered some ground to close 0.6% lower at $19,065/mt. Support is seen at $18,500/mt while resistance is at $19,500/mt. The most traded SHFE September contract traded rangebound to close overnight session lower at 143,360 yuan/mt. Support is seen at 142,000 yuan/mt while resistance is at 144,500 yuan/mt.