Aluminum prices are near to crucial support – Will it break or not?

Aluminum prices shed nearly 1.50%. Prices dropped from the high 215.10 and tested 203.75 levels. Prices came under pressure amid increasing signs of a manufacturing slowdown across the globe. An unexpected decline in Chinese manufacturing activity ramped up concerns over slowing demand in the world’s largest copper importer.

Aluminum prices have been gradually losing steam since hitting their strongest levels in January when optimism abounded about the reopening of the world’s second biggest economy.

Aluminium prices have shed 12% since touching a peak in January as output increased and inventories rose amid tepid demand for the metal used in the auto, packaging and construction sectors.

Top producer China saw primary aluminium output in March climb from a year earlier, but at a slower place than previous months.

The LME cash aluminium price is seen averaging $2,425 a tonne in the third quarter, 2% firmer than the current price.

Analysts have marked up their estimates for an aluminium market surplus this year to 113,500 tonnes from 80,535 tonnes forecast in January.

Technical Outlook

Aluminum prices turned negative from the peak of 215.10 and recently made a low of 203.75. Yesterday prices settled at 207.95, down by 1.19%.

On the above daily chart, prices failed to hold above crucial resistance 215.25 and retreated. Since then prices consolidating above crucial support 203.00.

Now prices travelling on a crucial support 206.00, coincided with 50 SMA. While a daily price action resulted in formation of a long bearish candlestick. Both indicators are creating a probability for downside momentum in near future.

However, prices would need to break its crucial support 206 in order to test 203.00-201.00. Alternatively, failure of the break may witness short term pullback towards immediate resistance 209.50-212 again.

Momentum expects to remain bearish in the near future amid jitters of global economic growth. But, prices would need to break its crucial support in order to extend recent losses.