Aluminium market rises on short covering, open interest drops 15.77%

Aluminium settled up 0.21% at 117.25 in thin trading but weak demand from top consumer China and a strong US dollar could put downward pressure on prices. Growth in China's economy is expected to slow to 7 percent next year from a forecast 7.3 percent this year, in part due to weakness in global economies, a top Chinese government think tank said on Monday. China's cooling economy, which grew at its slowest pace since the global financial crisis in the third quarter, has pinched the country's demand for copper imports this year.

A slew of lacklustre economic indicators this month suggest full-year growth may fall short of Beijing's official 7.5 percent target for the first time in 15 years. The US dollar index closed Monday at 90.19, the highest since 2006, piling pressure on base metals prices. The presidential candidate, Stavros Dimas, nominated by Greece’s prime minister, secured only 168 votes in the third round of poll, slightly below the 180 votes required for election. The election due early in 2015 thus may be won by the nation’s leftist party that is opposed to fiscal austerity, which is likely to rekindle a crisis in the euro zone.

Looking ahead, market would keep an eye on a string of economic data, including US home prices on Tuesday and US weekly jobless claims as well as China's HSBC Purchasing Managers' Index on Wednesday. Technically market is under short covering as market has witnessed drop in open interest by -15.77% to settled at 2009 while prices up 0.25 rupee, now Aluminium is getting support at 116.6 and below same could see a test of 115.7 level, and resistance is now likely to be seen at 118.1, a move above could see prices testing 118.7.

Trading Ideas: --Aluminium trading range for the day is 115.7-118.7. --Aluminium rebounded as signs of further slowing in China increase prospects of stimulus to spur economic growth in the biggest metals consumer.
--China’s primary aluminum imports dived 87.19% on the year in November 2014, due to unfavorable SHFE/LME arbitrage and rising premiums overseas
--The final December reading for HSBC Holdings Plc and Markit Economics’ manufacturing PMI for China will be 49.5