SMM Morning Comments (Jul 26)

SHANGHAI, Jul 26 (SMM) –

Copper: A firm US dollar weighed on copper overnight, forcing the most active SHFE September contract to ease from a higher open on the confirmation from the Chinese government that Washington and Beijing will resume face-to-face trade talks next week. The contract shed 0.23% to end at 46,950 yuan/mt, towards the middle Bollinger band and the 20-day moving average. Concerns about global economic growth slowdown and demand continued to weigh on oil prices. With a cocktail of macroeconomic developments, LME copper is expected to trade between $5,950-6,000/mt today, with SHFE copper at 46,800-47,100 yuan/mt. Spot premiums are seen up to 60 yuan/mt as the end to a period for concentrated deliveries for long-term contracts and month-end financial settlement thin out trades.

Aluminium: Three-month LME aluminium fluctuated between $1,818-1,832/mt on Thursday, and ended 0.11% higher at $1,826.5/mt. It is expected to trade between $1,805-1,855/mt today. The most traded SHFE September contract climbed to 13,915 yuan/mt overnight before it hovered in a tight range around 13,905 yuan/mt in the rest of trading hours. It gained 0.47% to close at 13,910 yuan/mt. The contact has returned above the five-, 10- and 20-day moving averages, and is expected to trade between 13,830-13,930 yuan/mt today, with spot prices at a discount of 20 yuan/mt to a premium of 20 yuan/mt.

Zinc: After three consecutive days of gains, three-month LME zinc slipped 1.12% to end at $2,427/mt on Thursday, suggesting strong resistance from the 40-day moving average. LME zinc is expected to trade rangebound today, as LME zinc inventories fell less than expected. Most transactions are seen at $2,400-2,450/mt. A weaker LME zinc dragged on its SHFE counterpart overnight. The most active SHFE September contract came off from a high of 19,345 yuan/mt to end 0.75% lower at 19,155 yuan/mt. It now stands fully below the middle Bollinger band and around the 10-day moving average. The contract is expected to trade between 19,000-19,500 yuan/mt today, as expectations of higher inventories linger amid a low consumption season.

Nickel: Three-month LME nickel resumed its pull-back, falling below the five- and 10-day moving averages and losing 3.44% to end at $14,030/mt. Whether it could hold above $14,000/mt is crucial to watch today. After a lower open, the most traded SHFE October contract hovered around 110,000 yuan/mt in a tight range overnight, and closed 2.38% lower at 109,880 yuan/mt. Strength at the 110,000 yuan/mt level is key to watch today, and pressure is strong from the five- and 10-day moving averages which adhere to each other.

Lead: Three-month LME lead extended its rally on Thursday, breaking the key $2,100/mt level to $2,117/mt, its highest since the middle of May, before finishing the trading day 1.01% higher at $2,097/mt. Growing open interest elevated the risks of a short squeeze, with the spread between cash lead and the three-month contract under scrutiny. The most active SHFE September contract climbed to a high of 16,900 yuan/mt overnight before it closed 1.08% higher at 16,865 yuan/mt. Longs remained keen to build positions at highs. LME lead is likely to continue to direct the Shanghai market in the near term.

Tin: Three-month LME tin fluctuated to close 0.75% lower at $17,800/mt on Thursday. Support is seen from a previous low of $17,500/mt. The most traded SHFE September contract erased earlier gains to end 0.22% lower at 134,860 yuan/mt overnight. Resistance is seen at 136,000 yuna/mt, while support is at 134,000 yuan/mt.