MI Comment: Aluminium on ‘cruise control’

Continued dollar weakness underpinned the metals complex on Tuesday, as a soft US housing market and worries about subprime mortgage losses persisted. The result was fresh fund buying across the LME initially with aluminium lifting from 2819 to 2842 before we went to press, albeit on very light turnover. The positive effect didn’t last long, as profit-taking set in the afternoon with fund managers pulling money back from equities and commodities alike. Aluminium eased lower to finish unchanged, while precious, oil and stock markets finished weaker, while lead weighed on the base complex on news of a smelter restart. Nearby spreads were unchanged, while the only discernible forward movement was a $2.00/mth tightening in Apr-Jun’09. One party remained on the lowest rung of the LME’s WC warrant banding report, as at close of business Monday. On Wednesday morning a sharp rally in the yen might have stimulated fresh buying interest from ‘under-hedged’ consumers, according to one local analyst, though simultaneously the euro tumbled. As such, the whole LME set extended yesterday’s afternoon weakness and aluminium had slipped to 2807 currently after opening at 2828. One report suggested putting aluminium on ‘auto pilot’ and going away for a month, with the market remaining firmly rangebound and not looking like travelling very far any time soon. Shorter term trends yet pointed to tests of overhead resistance c. 2900 and ‘even’ 2940, according to Cliff Green Consultancy, though in their latest report they too were on the sidelines awaiting a fresh signal. Last at 2810, on 1,600 electronic lots.