LME aluminium unlikely to rebound this week; to retest resistance at $1,488

Aluminium on London Metal Exchange (LME) will have little chance of a rally this week, SMM said last week, Friday.

The US dollar will stay elevated on US Fed’s hawkish tone, and SHFE aluminium will remain in downward track, boding ill for LME aluminium. Also, LME aluminium has met strong resistance at the 5-day moving average. The metal on London exchange is expected to retest resistance at $1,488 per tonne, as it has completed a downtrend from the October 9 high of $1,646.

The trend could be broken down into five small waves, signaling its completion. This explains why the metal could stabilise around support at $1,462, the 161.8 percent Fibonacci projection level of the trend.

The consolidation above this support strongly suggests the formation of a bottom, which will be followed by a decent bounce. The immediate resistance is at the 138.2 percent level, which temporarily blocks the way towards the 123.6 percent level at $1,505.

In China, smaller-than-expected production cuts and falling power costs will leave SHFE aluminium struggling around 10,000 yuan per tonne mark.

In China’s spot market, spot discounts will widen to over 100 yuan per tonne on growing supply.