MI Comment: Aluminium holds above 'pivotal' support

The LME complex had a tentative start to the week, which saw an increasing number of people set off on their summer holidays. Those left behind trod carefully as they feared a continuation of the 'risk reduction' that had hit most markets last week. Monday kicked off with another (expected) bank rate rise in China, and also with better-than-expected IP growth in Japan, while a dampening factor was a slide in the European Retail PMI. As we signed off yesterday aluminium had traded quietly between 2759 and 2746 and over the morning prices slipped further, to a low of 2735. From there things picked up after US markets appeared to stabilise, while tin and copper led the non-ferrous set higher with the latter plagued by labour disputes and an increasing realisation that supply/demand may actually be in deficit. The light metal's afternoon was uninspiring as prices recovered to 2760, though in late trading it ran on to a high of 2775. The nearby contango nudged a fraction wider throughout C-3m, while forward backwardations were $0.50-$1.00/mth steadier in isolated places. The LME's WC warrant banding report remained clear. On Tuesday morning trading resumed in Asia c. 2770 and after a high at 2775 values slipped back to 2760. Cliff Green Consultancy had as at last night pegged immediate resistance at 2780/90, while the presence of the 200- and 30-day moving averages also helped to restrain the market. Volumes were better than yesterday, though 1,200 lots via Select was nothing to write home about. 'Pivotal' support waited around 2710 CGC suggested, with a break below pointing to "more serious downward pressure", while a clearance of 2790 was required to relieve the downward pressure. Last at 2765.