Aluminium dragged down to 106.20, trading range 105.4-107

Aluminium settled down -0.14% at 106.20 dragged down by worse-than-expected US Q1 GDP and the US Fed’s continued QE3 tapering. Demand for aluminum is underpinned by an improving economy and tighter emissions regulations for automobiles. Last Friday, upbeat economic data reported from the US validated the Fed’s decision, weighing commodity markets on. The US factory orders for March fell short of forecast, but nonfarm payrolls grew at the fastest pace in two years during April, with jobless rate also on the way down, a sign that the US economy started rebounding following the inclement winter.

However, the labor force participation rate dropped from March’s 63.2% to 62.8%, a low last seen in 1978. Aluminium premiums in the US Midwest, Euro area and Japan averaged a record-high of US16.62c/lb last week, eclipsing the previous high of US16.54c/lb recorded in the previous week. The record level largely reflects the lift in the European premium from US14.40c/lb to US14.63c/lb. In late 2013, the LME agreed to new rules to cut withdrawal times to less than 50 days at its warehouses in an attempt to placate those aluminium buyers that felt that waiting times for the delivery of metals from LME warehouses were artificially inflating realised prices (spot plus premium). High aluminium premiums should give some respite to aluminium smelters that sell their metal at the realised price.

Technically market is under fresh selling as market has witnessed gain in open interest by 13.7% to settled at 3138 while prices down -0.15 rupee, now Aluminium is getting support at 105.9 and below same could see a test of 105.4 level, and resistance is now likely to be seen at 106.7, a move above could see prices testing 107.