LME aluminum to move between USD 1,880-1,910/mt: SMM Morning Review

China and Europe’s weak flash PMI reading for August raised expectations for easing monetary policies in the two regions. Combined with hint of possible QE3 by the US Federal Reserve (Fed), the US dollar extended losses for a fourth straight trading day to 81.221, the lowest for the month. In response, LME aluminum jumped to USD 1,900/mt and broke through resistance at the 60-day moving average during European session. Trading volumes doubled to 16,667 lots, the highest since July 3. However, as investors took profits at high prices, LME aluminum trimmed some early gains at the tail of trading. Finally, LME aluminum ended the day up USD 25/mt or 1.34% at USD 1,895/mt. Latest LME aluminum inventories were up 700 mt to 4,913,050 mt.

Investors are generally standing on the sidelines as the weekend approaches and due to the British Summer Bank Holiday next Monday, leaving aluminum prices in correction. LME aluminum will meet resistance at USD 1,900/mt and move between USD 1,880-1,910/mt on Friday. SHFE 1211 aluminum contract is expected to open at RMB 15,360/mt on Friday and resistance at RMB 15,400/mt will be strong, with prices between RMB 15,300-15,400/mt. Spot trading should be bleak, as demand for replenishing inventories will be low before the upcoming weekend. Spot discounts are expected between RMB 50-10/mt.