The Federal Reserve announced overnight that it will continue monthly purchase of USD 40 billion mortgage backed securities buy additional USD 45 billion long term Treasury bonds and keep low interest rate unchanged until at least mid 2015 unless unemployment rate and inflation reach a certain level after Operation Twist expires at year end.
The announcement triggered appetite for risky assets. The US dollar index retreated from 80 as a result. LME aluminum jumped to USD 2,148 per tonne during the European session, its highest since September 19. Trading volumes contracted slightly as longs were cautious towards buying at highs. Resistance remained strong at USD 2,150 per tonne. Finally, LME aluminum closed at USD 2,145 per tonne up USD 33 per tonne or 1.56%. Latest LME aluminum inventories decreased 9,650 tonnes to 5,167,650 tonnes.
Extension of the Fed's bond buying programs will give a boost to market confidence. LME aluminum should struggle at USD 2,140 per tonne and fluctuate in the band of USD 2,120 per tonne to USD 2,160 per tonne. The SHFE 1303 aluminum contract is expected to challenge resistance at CNY 15,400 per tonne with prices between CNY 15,350 per tonne to CNY 15,450 per tonne. Spot discounts are expected between CNY 0-40 per tonne. Traders will be in a hurry to move goods as aluminum prices have rebounded, while downstream producers and middlemen should show some buying interest, leaving overall trading stable.
