By Walter de Wet
After another good close yesterday, the complex is mixed again this morning. Macroeconomic data the next three days could keep the metals range-bound. Most notably would be the ECB interest rate decision tomorrow and ADP employment numbers in the US today and non-farm payrolls in Friday.
US employment numbers continue to move the markets, and Friday’s number might be no exception. While copper has largely shrugged off the earthquake in Chile, the metal continues to see good buying support.
However, buying is on the back of improved financial market sentiment and the slightly weaker dollar yesterday. Buying interest was muted in Asia today, and this may continue this week. Should employment numbers in the US please, copper time spreads may strengthen on growth expectations.
Although Chile’s production of copper is back online, there should still be the lingering uncertainty about infrastructure that could see downside for the metal well protected. Nickel continues to rise, with good support on the downside as dips continue to be bought.
The trend in LME nickel stocks has been lower the past few weeks, and there was another 744mt decline this morning. The buying is further supported by some pick-up in stainless steel demand. There are also growing reports of supply delays mainly due to bad weather in the US.
While the metal could pull back if copper declines, we believe that dips will be popular with buyers. Aluminium has seen another decline of 8,825mt in LME warehouse stock this morning, while cancelled warrants dropped 4,650mt.
However, of a range of variables we track, US equities have the highest correlation with equities on a 10-day basis. We expect this to remain the case. Aluminium may find support at $2,120, while the next resistance level is around $2,180.
Courtesy: Standard Bank
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