Weekly Commodities Wrap: Continued USD Strength Weighs on Metals

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Continued USD Strength Weighs on Metals

Gold

The yellow metal had a much quieter week this week, and over the course of a very constrained trading session, remained broadly unchanged after plumbing initial lows earlier in the week. The main driver behind the weakness in gold was continued USD strength as the USD short covering continued over the week. With US data strengthening again and the Fed, under new chairman Powell, reaffirming its commitment to tightening at a gradual pace over the year, USD short exposure has been sharply reduced over recent weeks.

There were some moments of caution for Gold bears this week however as the market braced itself for President Trump’s announcement regarding the Iran nuclear deal. Trump announced that the US would be withdrawing from the deal, agreed under the Obama administration in 2015, and would be imposing fresh sanctions on Iran. Geopolitical risks remain an important catalyst for Gold price direction though for now it seems that the market is not too worried by the US / Iran situation as the USD traded higher over the week.

Continued USD Strength Weighs on Metals GOLD

For now, gold prices are still sitting just under the supporting trend line of the large contracting triangle pattern which has framed price action for two years. However, gold is still sitting above key local support at the 1296.65 region and while above here focus remains on further upside. A break of this level would pave the way for a run down to deeper support at the 1196.52 level.

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Silver

Silver had a similarly quiet week, in the absence of any key US data, though was able to register a stronger gain than gold, printing a second consecutive positive week. A stronger USD keeps silver upside in check currently while any potential USD weakening in response to further provocative policy announcements by President Trump, has the potential to push silver higher.

Continued USD Strength Weighs on Metals SILVER

Silver prices too remain just below the supporting trend line of the large contracting triangle pattern. Frustratingly though, silver prices are little changed from where they were two months ago. Currently they are sitting in the middle of the 15.80 – 17.45 range that mapped the boundaries of price movement over the last nine months.

Copper

The red metal was also muted over the week and though ended lower, was able to recover some ground off initial lows plumbed earlier in the week. After rising last week on better China data, copper prices fell back this week as the stronger US Dollar weighed on demand. The latest industry news also added downside pressure as Chilean miner Cochilco announced that its copper production was up 18.9% in Q1 2018. This is important news for the market as Chile is the world’s largest producer of Copper and an increase in production is bearish for price.

Continued USD Strength Weighs on Metals COPPER

After rallying off the broken 2015 high at 2.963 to retest the broken bullish trend line, copper prices have since stalled and turned lower again. While above the 2.963 mark, focus remains on further upside though a break of that level will pave the way for a run down to deeper structural support at the 2.766 level. To the topside the key level remains the 2018 high around 3.276.

Iron

Iron ore prices tracked the moves seen across the broader commodity complex this week, moving lower as the stronger US Dollar weighed on demand. The declines lined up with weakness seen in Chinese steel markets this week, though with a recovery underway in steel demand, iron ore is expected to benefit as steel prices rise and production increases.

Continued USD Strength Weighs on Metals IRON

After rebounding off the rising trend line from 2017 lows to hit the $69 mark, iron has since stalled and is now consolidating just below that peak. While above the trend line, focus remains on a further rotation higher and the $70 mark mid-March swing low is the next focus point for traders.

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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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