Aluminium settled up 0.87% at 109.80 saw some support on a slight de-escalation of tensions in the Eastern Europe after Russia said it is ready for a dialogue with the newly elected Ukrainian leader. Also supporting prices, United Co. Rusal, the largest producer of the lightweight metal in the world, said it expects the global market to swing to a deficit of 1.3 million metric tonnes in 2014. Last Friday, the US nonfarm payroll data for May were reported above expectation, rising 217,000 jobs, and the unemployment rate remained at its lowest since September 2008 of 6.3%. The labor force participation rate remained at 62.8% in May. While Capacity cuts in China, the world biggest producer and consumer of aluminium, would be driven by higher material costs following a ban on unprocessed ore exports by Indonesia and by Chinese banks unhappy with outstanding loans. Rusal, one of the world's biggest aluminium producers, estimates that China has already cut 2.1 million tonnes of production so far and will cut another 1.5mtn before the end of the year, out of total annualised output of around 27 million tonnes. This would lead to a largely balanced market in China and a deficit in the rest of the world of about 1.4 million tonnes this year. A glut of output in China was behind a 50 percent surge in total aluminium stocks there to an estimated 3 million tonnes earlier this year, sparking a sell-off in Shanghai futures to record lows. Technically market is under fresh buying as market has witnessed gain in open interest by 0.31% to settled at 3925 while prices up 0.95 rupee, now Aluminium is getting support at 108.6 and below same could see a test of 107.4 level, And resistance is now likely to be seen at 110.5, a move above could see prices testing 111.2.

Trading Ideas:

Aluminium trading range for the day is 107.4-111.2.

Aluminium prices edged up as the relative lack of UK material on the continent led to a tightening of supply.

Demand is very strong in Europe, but prices have been flat for much of the year so far because supply levels have been so high.

Aluminium weekly stocks at Shanghai exchange came down by 884 tonnes.