Aluminium Dropped As Sentiment Over China's Economic Continues To Be Clouded

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Aluminium Dropped As Sentiment Over China's Economic Continues To Be Clouded
Credit: © Reuters.

Aluminium recorded a decline of -1.04% yesterday, settling at 199.6, as concerns over China's economic activity persisted. China's official PMI data revealed the fourth consecutive month of contraction in factory activity, contributing to uncertainty about the country's economic growth trajectory. The lack of clear indications of a turning point in China's economic performance disappointed investors. In contrast, the Caixin China General Manufacturing PMI unexpectedly reported growth, reaching 50.8 in January 2024, consistent with December's figure and surpassing market forecasts of 50.6.

This marked the third consecutive month of expansion in factory activity, contradicting official data that indicated prolonged weakness ahead of the Lunar New Year celebration. Primary metal imports surged to 1.54 million metric tons, a significant increase from 668,000 tons in 2022, though falling short of the record set in 2021 at 1.58 million tons. Conversely, Japan's imports of primary aluminium experienced a 26% decline to 1.03 million metric tons in 2023 due to sluggish demand in the construction and manufacturing industries.

From a technical perspective, the aluminium market is witnessing long liquidation, with a -3.74% drop in open interest, settling at 3,737. Aluminium is currently finding support at 198.8, and a breach below this level could lead to a test of 197.9. On the upside, resistance is anticipated at 201, with a move above potentially testing 202.3. The technical outlook suggests caution in the market, with traders closely monitoring key support and resistance levels for potential shifts in momentum.

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