Aluminium settled up 0.83% at 108.95 tracking gains from LME Aluminium which moved higher to USD 1,767/mt after Germany's IFO business confidence index in January rose to its highest since July 2011 at 110.6. However, the light metal fell back to USD 1,755/mt on the heels of worse-than-expected US new home sales in December. US economic data were generally positive, triggering expectations that the US Federal Reserve may continue to dial down its bond-buying program in February. This drove the US dollar index up, weighing on base metals prices. HSBC's flash China manufacturing PMI and US economic figures released later in the week were disappointing, driving base metals prices down further. Aluminum halted its rally last week after China's GDP data raised concerns that demand from the world's largest consumer may decline. A possible fall in China's demand will exacerbate the metal's surplus. Alcoa, the third-biggest producer of the lightweight metal, predicts China surplus to reach 400,000 tonnes in 2014, while the rest of the world may see a deficit of 300,000. Technically market is under short covering as market has witnessed drop in open interest by -12.37% to settled at 1835 while prices up 0.9 rupee, now Aluminium is getting support at 108 and below same could see a test of 107 level, And resistance is now likely to be seen at 109.5, a move above could see prices testing 110.

Trading Ideas:

Aluminium trading range for the day is 107-110.

Aluminium settled up tracking firmness in other base metals after Germany's IFO business confidence index in January rose

Still, investors didn't cut their expectations that the Fed would further roll down its QE stimulus program

Aluminium daily stocks at Shanghai exchange came down by 50 tonnes