Copper - Weekly Wrap - Sep 18, 2021 - Reliance Securities

Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities

Aluminium and copper fell this week weighed down by a stronger dollar and upbeat retail sales data could mean faster than expected withdrawal of stimulus.

Prices were range bound as prices initially showed strength as restrictions on output in China, the biggest producer, fuelled fears that supply will run short.

Speculators are betting on higher prices, raising their net long in LME aluminium to 35% of open contracts last week from 19% a week earlier.

However, after the initial strength, aluminium and copper fell as concerns over the property market in top consumer China and profit taking.

Additionally, faltering factory and retail activity in August in China, owing to new coronavirus outbreaks and supply disruptions also weighed on metals prices.

OUTLOOK

Looking ahead, both aluminium and copper prices would likely rise after a correction thanks to the Chinese output cuts, a rapid increase in the price of alumina, from which aluminium is made, dwindling exchange stockpiles and strong demand.

Additionally, the central bank of China (PBOC) infused liquidity to ease nerves. China's central bank injected 100 billion yuan through reverse repo operations into the banking system, resuming fresh fund injections for the first time in more than seven months.

However the market's focus will turn to next week's U.S. Federal Reserve meeting for news on the expected tapering of stimulus for the world's largest economy.

If the Fed begins its monetary easing in November-December, copper and other metals would face pressure but is likely to remain resilient thanks to supportive fundamentals.

Apart from the Fed meeting, PBOC monetary policy meeting will also move the markets in a holiday shortened next week.

China will be closed on Monday and Tuesday , while Japan is shut on Monday and Thursday.

Technically, LME Copper will trade on a negative note where resistance is at $9755-$9920 levels. Support is at $9540-$9220 levels.

LME Aluminium holds a resistance near $3030-$3200 levels. Support is at $2750-$2530 levels.

Domestically, MCX Copper September could see a resistance near 735-748 levels where support is at 718-705 levels.

MCX Aluminium could see sideways to marginal downside momentum below 231-236 levels. Support is at 225-221 levels.

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Source : Equity Bulls

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