Aluminium settled up 1.83% at 125.20 rose to its highest level in almost 18 months on deficit concerns after the World Bureau of Metal Statistics (WBMS) estimated that aluminium markets went from a surplus of 1.06Mt in 2013 to a 393kt deficit in 1H14. The output shortfall in the first six months of 2014 was 393,000 metric tons, compared with a 1.057 million-ton surplus in all of 2013, WBMS said. The minutes from Fed’s July policy meeting released Wednesday indicated the Fed officials came closer to agreement on an exit strategy from its monthly bond purchase, while raising the possibility that it might occur sooner than anticipated. In addition, the Fed agreed to use interest rates on excess reserves as its main tool to set the federal funds rate in the future. In response, the US dollar index climbed above 82, posting a 0.5% gain. US housing starts rose in July to a fresh 8-month high, while housing permits, a gauge of future house demand, increased by more than 8% during the same month. The country’s CPI edged up 0.1% MoM, the slowest growth in five months, and rose 2.0% from a year ago. The modest increase in CPI dovetailed with expectations and reduced pressures for the US Federal Reserve to raise interest rates.  Aluminium has gained 16 percent since late May as investors bet that capacity cutbacks by producers and strong demand will result in the market moving to a deficit this year. Technically market is under fresh buying as market has witnessed gain in open interest by 12.03% to settled at 6921, now Aluminium is getting support at 123.3 and below same could see a test of 121.2 level, And resistance is now likely to be seen at 126.4, a move above could see prices testing 127.4.

Trading Ideas:

Aluminium trading range for the day is 121.2-127.4.

Aluminum climbed after a report showed global production trailing consumption.

The output shortfall in the first six months of 2014 was 393,000 metric tons, compared with a 1.057 million-ton surplus in all of 2013, WBMS said.

Aluminium daily stocks at Shanghai exchange came down by 3951 tonnes.