SMM Morning Review - 2011/7/6 Aluminum Market

The US Department of Commerce (DOC) announced on July 5 factory orders in May increased 0.8%, slightly lower than the expected 1.0%. The revised durable goods orders rose 2.1%, which is slightly higher than previous month. Such economic data showed that US industrial activity was moderately growing, which boosted investors’ confidence, causing base metal prices overnight to rise. Later, the Moody’s downgraded Portugal’s credit rating from BAA1, to BA2, with a negative outlook. As a result, the euro fell after a rise of six consecutive days due to escalating debt crisis in another European country besides Greece. The US dollar index jumped back to the five-day moving average, but met resistance at the 60-day moving average, finally closing at 74.619, up 0.5%.
LME aluminum prices overnight surged 2.22%. During European trading hours, LME aluminum prices broke through the 30-day moving average due to rising crude prices and aggressive transactions, with prices hitting USD 2,580/mt, a record high since June 16th. Finally, LME aluminum prices closed at USD 2,570.8/mt, up USD 55.8/mt. Total positions decreased by 1,189 lots to 681,807 lots.
LME aluminum prices should consolidate at the 5-day moving average and fluctuate between USD 2,540-2,590/mt today. SHFE 1109 aluminum contract prices are expected to open higher and rise to fluctuate between RMB 17,310-17,410/mt. Spot discounts against SHFE spot-month aluminum contract prices are expected between positive RMB 10-50/mt. Traders should be active due to limited goods supply from cargo holders.