Aluminium settled up 1.21% at 108.65 as support seen after the update that automakers' increasing use of aluminum use and production cut from Alcoa, UC Rusal cut may boost Aluminum. Market sentiment toward aluminum has improved. The potential for better demand growth fueled by Ford’s announcement of the F-150 aluminum body, combined with producers such as Alcoa and UC Rusal announcing production cuts, has lifted prospects for the light metal. Increasing use of aluminum in auto production going forward, with 20% of auto production in the United States, Europe and China seen substituting aluminum for steel, based on estimated incremental metal use in the F-150. Production curtailments are positive but it took four years of surplus markets and weak prices. The biggest downside risk to the positive momentum is the potential for idled capacity to restart as prices improve. Moreover, expectations of a deficit on the market pushed the lightweight metal higher. Recently, United Co. Rusal, the world’s biggest producer, reported that global market was likely to swing to a deficit of 1.3 million tonnes this year. Also supporting prices, demand from Japan, the biggest importer of the metal in Asia, continued to strengthen. Last week, Japanese importers agreed to pay a record fee for the base metal, citing solid demand and production cuts. Technically market is under short covering as market has witnessed drop in open interest by -12.03% to settled at 2866 while prices up 1.3 rupee, now Aluminium is getting support at 107.9 and below same could see a test of 107.1 level, And resistance is now likely to be seen at 109.2, a move above could see prices testing 109.7.

Trading Ideas:

Aluminium trading range for the day is 107.1-109.7.

Aluminium gained as China’s industrial output and retail sales data for May matched forecasts, easing worries over a China slowdown.

In the week ahead, investors will be focusing on the outcome of Wednesday’s Federal Reserve policy meeting.

Aluminium weekly stocks at Shanghai exchange came up by 626 tonnes.