Friday, June 11, 2021 09:43 AM – Rajan Dhall
As suggested in the past few weeks in the comments on commodities, China’s tough pressure on commodity prices is damaging non-ferrous metals.
Copper has traded lower in the past week and the red metal is down 0.59% at time of writing. Interestingly, some market commentary from large investment banks continues to support the rise in non-ferrous metal prices, especially those associated with the electric vehicle market.
Focus on this week’s commoditiesI will go over the charts in more detail. Fundamentals continue to firmly support price increases, but if the US dollar strengthens, it could hamper performance. The stock markets are obsessed with inflation, so this is one of the topics that you bulls in stocks will need to watch out for.
The below monthly chart of copper futures shows that the price is stuck between two strong levels. Resistance comes from the February 2011 high, and although the price moved above that level, there was no close above the price zone. On the other hand, the next support could be at the May 2008 high, and recently, in February of this year, this level was used as a resistance zone, and from a technical point of view, resistance often becomes support once it is broken. Another very important point that should be highlighted on the chart is the increase in the volume of purchases. The histogram at the bottom of the chart shows how the buying candles are gaining speed and the volume is also increasing. Overall, this is still a very bullish market. At some point there had to be a pause for breathing, and the question is how long it will last.
Another asset class causing inflationary problems is oil. The WTI rolling oil futures contract below shows the price topped $ 70 a barrel this week. WTI oil prices were last so high in 2018. There were bullish signals in the options market, with some premiums rising to $ 100 a barrel. Before this price, the next resistance level is in the green zone just below $ 80 a barrel. There has been significant price action around this level, and it was the previous high of the wave of the aforementioned period in 2018. However, the trend is still very strong and shows no signs of slowing down at the moment. If the green zone is broken, the next level could be $ 100 per barrel. Since the trend line break was marked on the chart, the price did not look back and there is no reason to assume that this train is slowing down.
The weekly chart for gold shows that the yellow metal may be losing momentum. Having said that, the price is trading half a percentage point higher this week and the inflationary story seems to hold true for the time being. The next area to watch out for is the 0.618% Fibonacci retracement level, and if the price finally closes above this level, then the market may be more convinced that the previous all-time high can be tested. Of course, there is a psychological level of 2 thousand dollars per ounce, but the main technical resistance may appear just before that at the level of 1961.4 dollars per ounce. The jury has yet to decide if this is just a pullback or the start of a reversal, and we will be able to see in the coming weeks if the next resistance will break.
The writer’s views are their own and not representative of South East London. No advice is given or given. If you require financial advice, contact an independent financial advisor.