Nickel has found sustained selling above its DTL at $12,960 again, with the shaven top a sign of strong selling above this level.
With the metal finding support from the rising 7 DMA at $12,861, short-term upside pressure is intact.
The stochastics are heading higher, signalling a sustained shift away from selling strength. The metal’s sustained divergence from lower BB at $12,144 confirms this.
The MACD and momentum are both drifting lower, confirming maintained downside strength above the DTL.
Macro factors
Chinese nickel imports in April jumped to their highest since January 2014 – a move hat was mirrored in concentrate imports, which rose to a six-month high, implying a shift towards restocking. The cause is probably falling Chinese NPI production, which has been driven by the Indonesian ore export ban reducing the grade of nickel ores available to the market.
Still, nickel LME stocks continue to head higher, setting another high for the year at 470,376 tonnes. But should a shift towards Chinese restocking be confirmed, we would not be surprised if this trend changes.
LME COT data shows increases in both the long and short positions, indicating divergence in the market. This reflects the potential for a shift in trend to the upside. While tightness in China grows and with the short position continuing to rise, we would not be surprised by renewed short-covering should there be an upside reversal.
Renewed dollar weakness may be providing support; we now look to Friday’s US non-farm payrolls report and tomorrow’s deadline for Greece’s 350-million-euro repayment to the IMF to drive price volatility.
Conclusion
Nickel is consolidating between selling above its DTL and rising short-term pressure from the 7 DMA. Which way it breaks from this range will signal the predominant price trend.
Failure to hold above the 7 DMA would signal a shift in short-term pressure, opening up a retest of support above the May low at $12,560.
But failure to break support below the 7 DMA would confirm maintained short-term upside pressure, maintaining the potential for a short-term upside reversal.
