Short term
(1-3M):
Flat
Medium term
(3-6M):
Down
Long term
12M):
Flat
Resistances:
R1 13,123 200 DMA
R2 13,247 100 DMA
R3 14,285 40 DMA
R4 14,851 20 DMA
R5 15,810 Sep 3 high
R6 16,690 Apr 3 '18 high
Support:
S1 15,675 Nov 12/13 high
S2 14,851 20 DMA
S3 14,285 40 DMA
S4 14,020 Aug 13 low
S5 13,247 100 DMA
S6 12,140 Feb 28 low
Stochastics:
Trending lower
Legend:

BB - Bollinger band
DMA - daily moving average
HSL - Horizontal support line
SL - support line
MACD - Moving average convergence divergence
DTL - downtrend line
UTL - Uptrend line
H&S - Head-and-shoulder pattern
RSI - relative strength index



Analysis
  • Nickel prices have made a mixed start on Monday September 7 - the London Metal Exchange three-month benchmark is consolidating, having found support ahead of $15,000 per tonne.
  • Momentum indicators have rolled lower - the stochastics are trending lower, as is the RSI, although at 60 it remains supportive overall.
  • Nickel has been capped by overhead selling pressure so far this morning, as implied by the upper shadow visible on today's daily candlestick. Further resistance is seen at the September 3 high $15,810. The April 2018 high stands above there at $16,690 per tonne.  
  • In terms of support, $14,950 per tonne marks the 50% Fibo of the August 13-September 3 rally. The 20 DMA stands at $14,851 per tonne ahead of the UTL from the March low at $13,790 per tonne.
Macro drivers
LME nickel stocks totaled 236,508 tonnes on Monday, just below the recent one-year high of 239,304 tonnes - strong two-way flows continue. Meanwhile, fresh cancelations remain supportive; currently 24.7% of stock is booked for removal. The LME cash/three-month spread was most recently at $41.50 per tonne contango.

In contrast, nickel stocks in Shanghai Futures Exchange-listed warehouses totaled 33,182 tonnes on September 4, down from 37,407 tonnes at the end of December 2019. 

In the physical market, nickel premiums into China were unchanged in the week on September 2, reflecting a closed import arbitrage between the SHFE and the LME. Strong prices and muted holiday demand continue to cap premiums in Europe and the United States. 

In China, domestic stainless steel prices rose for a tenth week amid a strengthening nickel market and good downstream demand while infrastructure investment plans are in progress. Trade figures from China released earlier today showed iron ore imports dropped by 10.9% month on month in August from record levels in July but remain up 5.8% on year-earlier volumes, which will continue to support activity among Chinese steelmakers. 

The global refined nickel market was in a 57,300-tonne surplus in the first five months of 2020, according to the latest figures from the International Nickel Study Group (INSG). Based on our latest revisions, we forecast the refined nickel market to record a 105,000-tonne surplus in 2020.

Incentives supporting new energy vehicles (NEVs) sale are having a positive impact in place of traditional internal combustion engine (ICE) vehicles, which should help accelerate the electric vehicle revolution and, in turn, provide additional demand for nickel sulfate. 

Conclusion
We maintain our view that price action is likely to prove more mixed in the short term, with the price having entered an area of strong overhead resistance. But in view of the strong activity in the stainless steel sector as infrastructure investments feed through and continued growth in the NEV sector, we remain bullish towards nickel over the longer term, although prices may need consolidate/correct before extending to fresh highs.


All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.