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Aluminium prices rose through key resistance levels on Monday, supported by lower inventory, a weaker dollar and expectations the U.S. Federal Reserve will this week announce a bigger rate cut.
Three-month aluminium on the London Metal Exchange (LME) was up 1.9% at $2,518 a metric ton during official rings. Gains pared after rising 2.5% to $2,534.5, the highest since Aug. 28.
On a technical level, the light metal, widely used in auto-making and packaging, was still strong after a 5.2% rally last week, a trader said.
It broke through the 100-day moving average of $2,480 earlier in the session to create further upward momentum. It had already surpassed the 21-day, 50-day and 200-day averages.
Systemic buying from commodity trading advisors, or CTA, was evident this morning, according to brokerage Marex. These funds buy and sell based on signals from numerical models.
A large futures position also remained on the LME to buy aluminium in October and sell in November <0#LME-FBR>. The premium, or backwardation, rose to about $15 a ton for the October contract over November .
Prices have been boosted by a shrinking aluminium supply that has fallen to its lowest in 18 weeks. The inventory in LME's registered warehouses dropped to 820,850 tons, having fallen 18% over the last three months.
Among macro factors, the dollar weakened on Monday in anticipation the U.S. central bank will opt for a larger 50 basis point cut.
Lower interest rates could pressure the U.S. currency and make dollar-priced metals cheaper for holders of other currencies.
Markets in China, the biggest aluminium consumer, are closed until Wednesday for a public holiday.
Weekend data showed industrial output growth in China slowed to a five-month low in August, while retail sales and new home prices weakened further.
For other metals, LME copper went up 0.3% to $9,340 a ton, lead gained 0.5% at $2,054, tin ticked up 0.3% at $31,900 and nickel rose 1.6% to $16,195, LME zinc was up 1% at $2,934.
(Reporting by Julian Luk in London, additional reporting by Mai Nguyen in Hanoi; editing by Barbara Lewis)