Nickel just had a standout moment on the London Metal Exchange. On September 12, futures surged by ​​$241/ton\ast \ast tocloseat\ast \ast$15,391/ton​​, while spot prices jumped ​​$244/ton\ast \ast to\ast \ast$15,220/ton​​—marking the highest level since early September and sealing a weekly gain despite lingering oversupply worries .

So, what’s driving this rally?

It’s largely a dollar story. The ​​US dollar index​​ dipped for the second consecutive week, fueled by the Fed’s rate cut signals and a surprise drop in September’s US consumer confidence data. A weaker dollar makes dollar-priced metals like nickel cheaper for holders of other currencies, boosting international demand. Historical data suggests a 1% drop in the dollar index can lift base metal prices by nearly 0.8% .

But here’s the twist:

Nickel’s fundamentals aren’t exactly bullish. The market is still grappling with ​​oversupply​​—LME inventories recently swelled by 3,996 tons in a single day, hitting 214,230 tons . Yet, prices climbed anyway. This divergence highlights how financial factors (dollar moves, rate cut bets) are overriding physical market conditions for now .

Traders are also watching:

• ​​Fed policy shifts​​: Rate cuts could further weaken the dollar, but hawkish surprises would reverse gains.

• ​​Indonesian supply dynamics​​: Export quota delays and policy changes from the world’s top producer could tighten supply .

• ​​Stainless steel & EV demand​​: Weakness in construction is dragging stainless demand, though EV battery needs offer long-term support .

Short-term outlook:

Volatility is guaranteed. Prices might test higher if dollar softness persists, but ​​oversupply pressures​​ could cap rallies. Most market participants expect nickel to trade in a ​​$15,000–$15,500/ton range​​ near-term, with breaks beyond relying on fresh catalysts like supply cuts or stronger Chinese import data .