Copper ticks up; China policy eyed, technicals point higher

* Copper prices rise 0.3 pct, LME seen $9,000-$10,180

* Aluminium seen outperforming in Q2 on energy costs

* Coming Up: Euro zone consumer confidence for April; 1400 GMT

(Updates prices)

By Nick Trevethan

SINGAPORE, April 18 (Reuters) - Copper prices reversed early losses on Monday, focusing on a more positive technical outlook, with some in the market viewing China's reserve ratio hike as a step closer to the end of the monetary tightening cycle.

Three-month copper on the London Metal Exchange rose $31.75 to $9,436.75 a tonne by 0700 GMT. Shanghai's most-active June copper futures contract SCFcv1 rose 210 yuan to 71,040 yuan a tonne, after ending last week down 3.5 percent, its biggest weekly drop in a month.

Shanghai copper traded at a discount of 1,126 yuan versus the benchmark LME contract, counting for China's 17 percent VAT.

"Each time China raises rates, the market reacts less and less," said a trader in Hong Kong. "The level of inflation is still of great concern, but each increase in interest rates and ratios takes us closer to the end of the tightening cycle."

China's central bank said on Sunday it would raise lenders' required reserves by 50 basis points, the fourth time this year it has made such a move.

The move increases the required reserve ratio for the country's biggest banks to a record 20.5 percent, another step in the government's campaign to control inflation.

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Technically, copper prices could rebound to $9,500, Reuters analyst Wang Tao said, based on an Elliott wave analysis of short-term market behaviour.

Click on link.reuters.com/rur98r.

"LME prices are basically still in their rangebound trading pattern and that will continue this week," said Judy Zhu, a commodity analyst at Standard Chartered Bank.

She expected copper to trade below February's record high of $10,180, with an initial floor at $9,000 and further support at $8,800.

She added that the reserve ratio hike and comments from the People's Bank of China on the chances of further tightening would continue to cap prices in the second quarter, while the prospects of a weakening dollar were supportive.

"The likely result is metals will trade in tight ranges."

Over the weekend, the PBOC's chief said the more prudential policy would continue for a while and also that inflation remains higher than the government is comfortable with.

Data on Friday showed Chinese consumer price inflation rose to 5.4 percent in the year to March, its highest in almost three years. [ID:nLDE73E0A2]

Copper may also see pressure after the International Copper Study Group (ICSG) trimmed its 2011 global copper market deficit forecast to 377,000 tonnes, about 20,000 tonnes narrower than its previous forecast in October 2010. [ID:nN15530994]

"There wasn't that much positive news on Friday. Aluminium especially was a bit of a surprise, up 1.6 percent in spite of the predominantly bearish numbers," a Sydney-based trader said.

Aluminium rose $13 to $2,703 a tonne.

"Aluminium is in a healthy upward trend and if oil prices stay high, it will be very supportive. Energy makes up 30 percent of input costs," StanChart's Zhu said.

Oil prices in London and New York fell on Monday but at $122.90 a barrel for Brent LCOc1 and $108.81 for WTI CLc1, were near recent 32-month highs.

Zinc fell $3 to $2,395. Technically, the upside for zinc may be capped in the near term, said chartist Daryl Guppy of Guppytraders.com.

"Zinc is constrained in the upper section of a broad trading band. Resistance is near $2,600. Support is near $2,200. A breakout above resistance has a target near $3,000."

Base metals prices at 0700 GMT Metal Last Change Pct Move YTD pct chg LME Cu 9436.75 31.75 +0.34 -1.70 SHFE CU FUT JUN1 71040 210 +0.30 -1.13 LME Alum 2703.00 13.00 +0.48 9.43 SHFE AL FUT JUN1 16760 50 +0.30 -0.48 HG COPPER MAY1 427.45 -2.65 +0.40 -3.72 LME Zinc 2395.00 -3.00 -0.13 -2.40 SHFE ZN FUT JUN1 18265 -05 -0.03 -6.21 LME Nickel 26550.00 395.00 +1.51 7.27 LME Lead 2660.00 9.00 +0.34 4.31 SHFE PB FUT SEP1 18580 00 +0.00 1.25 LME Tin 33099.00 -1.00 -0.00 23.04 LME/Shanghai arb 1126

Shanghai and COMEX contracts show most active months

^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE
  third month

Shanghai lead launched on March 24

(Source: http://af.reuters.com/article/metalsNews/idAFL3E7FI0YO20110418)