Weekly Commodities Wrap: Weaker USD & China Demand Fuel Metals Recovery

Oct 28, 9:39 pm
zinc_metals_commodities

Copper:  Weak US Data Fuels Dollar Unwind

Copper prices sustained a significant rebound this week benefiting from a weakened US Dollar on the back of poor data. US Consumer Confidence released on Tuesday was weaker than expected at 98.6 from 103.5 in September. This softer figure comes after two consecutively monthly gains on the reading and reflects a weaker consumer outlook.

Copper prices had been under pressure as concerns grow over further anticipated supply from China. Despite supply concerns, demand in the country remains strong and is expected to rise around 3% this year and next against initial expectations of a flat or negative number. The latest data from the London Metal Exchange show that funds are still backing higher prices in the metal. However, net long positions are now at 36,019 lots, down from around 42,464 lots on October 12th.

copper

Price have firmly rebounded off the rising trend line support from the larger contracting triangle pattern which has framed price action this year.

Iron Ore: Output Cuts Fuel Price Rise

Iron ore prices surged higher this week fuelled by a cut in output guidance from top producers and a rebound in top Chinese consumer demand. The nation, which accounts for70% of the world’s iron trade, imported 93mio tonnes in September which is only marginally down from the record 96.3 mio tonne shipment in December last year.

Prices rose to their highest level of the last two months. Iron ore miner Vale reduced their production outlook for 2017 to 360m-380m tonnes, down from their original forecast of 380m – 400m tonnes.  Prices have increased by over two thirds from their near decade lows in December last year.

The second top global producer also cut its outlook for this year’s shipment which has been disrupted by logistics bottlenecks in Western Australia.

iron

Iron prices continue to grind higher within a broad bullish channel suggesting a rotation back up into he channel resistance.

Zinc: Shortages Fuel Rally

Zinc Prices were also higher this week as availability on the London Metal Exchange fell after cancelled warrants spiked.  There were 31,275 tonnes of fresh warrant cancellations in exchange listed warehouses which saw availability of the metal drop to a four-month low. Stocks were also down 825 tonnes to 454,100 tonnes.

Concerns about shortages on mine closures and operation suspensions have fuelled buoyant prices this year with Zinc having risen around 43% year to date.

zinc

Zinc price this week rebounded off the rising trend line support to move back up and challenge the initial year to date. Price is now at a potential right shoulder of a large head and shoulders reversal pattern. A break above year to date highs is needed to negate the pattern.

Platinum: Receding Strike Concerns Fuel Rally

Platinum prices enjoyed a strong recovery this week. With wage agreements in South Africa now in place, the threat of strikes has receded significantly creating support for the metal which has ben under pressure over recent months.

Gross long positions in the metal had become extremely extended, peaking at 62,259 contracts in August. As of October 18th the position had shrunk to just 48,218 contracts as the threat of strikes weighed on investor sentiment.  The recent rally is likely due to short covering with short positions having built up as high as 27,781 contracts last week.

platinum

Platinum prices rebounded this week to challenge the underside of broken structural support at the June lows where price is currently stalled having found resistance. Further resistance is added by the bearish trend line from year to date highs which is also at the level.

Aluminium: Shortages Fuel Rally

Aluminium prices also rose this week fuelled by higher coal prices. Coal shortages in China as a result of government driven capacity cuts that closed down mines has fuelled a rebound in coal prices. With coal a key input prices for Aluminium, the metal has tracked these moves and risen over the week.

aluminium

Prices are now once again on the rise., approaching current October highs and are currently stalled at a test of bearish trend line resistance from year to date highs.

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With over 6 years’ experience analysing currency markets, James is now a well-known industry analyst focusing on price action trading and fundamental drivers. Beginning as a private retail trader, James developed a strong interest in understanding the fundamental aspect of the market before pursuing technical trading capabilities which he now uses to identify opportunities over a short-term horizon. Alongside his market experience, James is also IMC certified having achieved the qualification to help further his understanding not only of the markets but the industry as a whole. James has a strong interest in both fundamentals and technicals and uses both forms of analysis in generating and executing trade ideas, with trades generally lasting from a few hours to a few days.