Weekly Commodities Wrap: Weaker US Dollar Fuels Metals Rebound

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Gold

The yellow metal was able to reclaim some lost ground over the week benefiting from a weaker US Dollar which fell in response to the latest FOMC meeting. In a clear case of ‘buy the rumour sell the news’, the US Dollar fell despite the Fed raising rates and revising its economic forecast higher. The Fed raised its forecast for 2018 GDP growth from 2.5 percent in December to 2.7 percent, and increased the 2019 expectation from 2.1 percent to 2.4 percent. Alongside the .25% increase, the Fed also gave the market a signal that the path of further rate hikes will be more aggressive than originally projected. The Fed adding a further rate increase to its dot plot projections over the next two years, taking the total number of projected rate hikes to four.

The technical landscape in Gold remains largely unchanged from last week as the stagnation into the apex of the large contracting triangle pattern continues to intensify. Prices are locked in a range between support at the 1296.65 level and bearish trend line resistance running from the 2016 highs which continues to cap any upside moves.

Silver

The price of silver tracked the moves in gold this week, edging higher over the course of trading as the US Dollar tumbled in response to the latest fed rate hike, which had been well signalled to the market. For now, it appears that there is some scepticism surrounding the perceived likelihood of the Fed following through with its projected rate hikes.

Silver prices are tracking the moves in gold and price action has simply lost all momentum over recent week hold in a tight consolidation pattern just below the contracting triangle trendline support. While above key structural support at the 15.80 level, this range play is likely to continue.

Copper: Global Copper Deficit Widens

While still softer on the week, the red metal managed to claw its way back from three month lows this week as commodities benefited from USD weakness seen in the wake of the Fed’s latest rate hike.  Adding further support for the industrial metal was the latest industry data which showed that the global copper deficit widened 21% over 2017 to a deficit of 163,000 tonnes compared with 135,000 in 2016.

Data from ICSG showed that global mine output was down 2% in 2017 to 20 million tonnes, mainly linked to a 1% fall in production in Chile, which is the world’s largest producer of the red metal. The decline in this region was mainly attributable to the strike at the Escondida mine seen over the first part of the year as well reduced output from the state owned Codelco mines.

After testing bullish channel support, copper prices have once again seen buyers stepping in. Price remains above key structural support at the 2.965 level and though recent moves have shown a loss of momentum in the upside run, while still above this level, focus will be on another test of the year to date high.

Iron: End of China NPC Sees Buyers Step In

The bout of USD selling in response to the latest Fed rate hike saw some buying kick in mid-week in iron though prices are now down over 15% on the month as selling has grown in momentum. Some industry commentators also point to the conclusion of the National People’s Congress which concluded on Wednesday and had been linked to weakness in steel markets over recent weeks.

After a small rebound last week, price failed to break back above resistance at the broken $73 swing low which saw sellers stepping back in to drive price down once again. Price is now sitting just above the next key support level at the $66 mark December 2017 swing low.

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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.

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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.

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