Aluminium yesterday settled up 1.04% at 106.50 as rupee weakness supported while pressure seen on LME after LME aluminum inventories surged 69,000 mt to 5.35 million mt last night, a new record high. Mounting inventories fuelled concerns over tepid demand. Investors pulled out of the market ahead of the result of US Federal Reserve policy meeting, causing LME aluminum positions to tumble 22,439 lots to 742,606 lots. LME aluminum found its low at USD 1,832/mt during the European trading session, but recouped some losses at the tail of the session before finally closing down 0.50% at USD 1,841/mt, down for eight days in a row. Aluminum prices will remain low due to worries over growing supply, in spot market, traders will be anxious to sell, but downstream producers will purchase only on an as-needed basis. Germany's ZEW economic sentiment index in June rose to 38.5, with the growth better than expectations, and ZEW June economic sentiment index climbed to 30.6, compared to 27.6 in the previous month. State Administration of Foreign Exchange (SAFE) revised current account surplus in Q1 to USD 47.6 billion on June 18, compared to the initial USD 55.2 billion, and revised capital and financial account surplus in Q1 to USD 90.1 billion, compared to the initial USD 101.8 billion. Besides, hot money began to flow out of China, and foreign exchange receipts continued to decrease. Although China can ease liquidity tightness by reverse repurchasing and Short-term Liquidity Operations, market expectations that China will lower deposit reserve ratio increase. Technically market is getting support at 105.8 and below same could see a test of
105.1 level, And resistance is now likely to be seen at 106.9, a move above could see prices testing 107.3.

Trading Ideas:

Aluminium trading range for the day is 105.1-107.3.

Aluminium gained as rupee weakness supported while pressure seen on LME after LME aluminum inventories surged 69,000 mt to 5.35 million mt

The aluminium sector, burdened by overproduction, was jolted after data showed an inflow of 68,725 tonnes of stocks into warehouses.

Expectations the Fed might discuss early tapering of quantitative easing are putting downward pressure on prices.