Metals News
SMM Evening Comments (Feb 20): Shanghai copper edged higher as gains capped by strong US dollar
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Feb 20,2020

SHANGHAI, Feb 20 (SMM) – Shanghai base metals closed mostly higher on Thursday, but gains were capped by a stronger US dollar as January's minutes from the Federal Open Market Committee signaled that US interest rates at their current levels is likely to remain appropriate for some time.


On the Shanghai Futures Exchange, tin added 1.5% to lead the gains, copper, zinc and lead inched up about 0.1%. Nickel shed more than 0.1%, and aluminium fell close to 0.3%. Their counterparts on the London Metal Exchange, meanwhile, cruised broadly lower.


In the FOMC meeting minutes released overnight, the Fed highlighted the need to monitor closely the developments related to the coronavirus, but with US economic activity growing at a “moderate pace” and jobs market remaining “strong”, the Fed's policy outlook is “likely to remain appropriate for a time.”


The greenback moved towards three-year highs against a basket of currencies following the FOMC minutes.


Market sentiment, meanwhile, was supported by China’s latest efforts to offset the economic impact from the coronavirus epidemic outbreak.


The People's Bank of China on Thursday cut the one-year loan prime rate (LPR) 0.1% to 4.05% from the previous monthly fixing. The LPR is a lending reference rate set monthly by 18 banks at which they lend to customers with good credit.

Thursday's move, marking the first cut since October last year, aims to support small and mid-sized enterprises which are severely hit by the outbreak of the new coronavirus.

Meanwhile, the five-year LPR, which guides housing loans, was lowered by 0.05% to 4.75%. The last rate cut was also in November.


China’s futures markets have suspended night trading session until further notice.


Copper: The most-traded SHFE 2004 contract came off from a nearly three-week high of 46,570 yuan/mt to an intraday low of 46,230 yuan/mt, before it clawed back those losses to close the day 0.11% higher at 46,430 yuan/mt. SHFE copper now faces resistance from the 20-day moving average, and whether it could remain above 46,400 yuan/mt will come under scrutiny tomorrow.


Aluminium: The most-active SHFE 2004 contract slid, losing 0.26% on the day to end at 13,670 yuan/mt.


Zinc: As shorts fled, the most-liquid SHFE 2004 contract reversed an earlier slip from a one-week low of 17,100 yuan/mt, to close the day 0.09% higher at 17,180 yuan/mt. Recovering demand is likely to lift SHFE zinc from lows, and a resistance confluence of the five- and 10-day moving averages will come under scrutiny in the short term.


Nickel: The most-traded SHFE 2004 contract slipped to a two-week low of 103,330 yuan/mt, before it recovered some ground to close the day 0.14% lower at 104,080 yuan/mt. It remains under pressure from the five- and 10-day moving averages. Whether it could hold to the 104,000 yuan/mt level will come under scrutiny tomorrow.


Lead: The most-liquid SHFE 2004 contract fell to an intraday low of 14,450 yuan/mt, before it recouped those losses to close the day a tad firmer at 14,540 yuan/mt. Support remained at the five-day moving average, but its recent rally appeared to be out of steam. A pull-back in its LME counterpart will also weigh on SHFE lead.


Tin: The most-traded SHFE 2006 contract recouped earlier losses to end the day 0.15% higher at 135,860 yuan/mt. SHFE tin remained between the five- and 20-day moving averages. Resistance is seen at the 40-day moving average at 136,700 yuan/mt.

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