Slowing growth hitting Iron Ore prices trading near key levels

Slowing growth hitting Iron Ore prices; trading near key levels

China released its official PMI data earlier at 50.1 vs 50.2 expected and 50.4 in July. It now sits just above the contraction/expansion level of 50 and is at its lowest level since the pandemic struck in February 2020. In addition, its non-manufacturing index fell to 47.5 vs an expected 50.3 and 53.3 last. The composite PMI was dragged below 50, which is contraction territory. The reduction in confidence from the delta variant of the conronavirus and inflationary pressures are the usual culprits for the slowdown, however, China’s crackdown on carbon emissions is also hitting the manufacturing sector. In addition to August’s weaker PMI data, July Industrial Production and Retail Sales were also much lower than June’s prints. Last week, flash PMIs also showed that manufacturing in many parts of the world were also slowing (this should be confirmed on Wednesday in the final manufacturing PMIs).

What are economic indicators?

Australia releases Q2 GDP later. Australia is a large exporter of Iron Ore to China. If the print is weaker, Iron Ore and AUD/USD prices move lower.

Learn more about forex trading opportunities.

The slowdown has led to a reduction in demand for Steel. Therefore, prices of Steel components, such as Iron Ore, have also taken a hit! Using the Iron Ore front month futures contract (September) as a proxy for Iron Ore prices (FEFU21), the weekly timeframe shows that Iron Ore prices had been relatively stable in the months leading up to the pandemic. However, once global monetary stimulus has become “infinitely” accommodative, prices began to rise, as demand for Steel and Iron Ore grew. During the week of February 3^rd, 2020, Iron Ore futures traded as low as 77.10. By the week of May 10^th, 2021, price reached an all-time high of 226.85! During the week of July 5^th, price was trading near those highs, however since then, Iron Ore fell over 50% from the February 2020 lows to the May 2021 highs and is currently trading just above horizontal support, near 146.40.

Source: Tradingview, Stone X

On a daily timeframe, Iron Ore is testing its 2021 low. If price breaks below, the next level of support is at the 61.8% Fibonacci retracement from the February 2020 low to the May 2021 high near 134.55. Horizontal support sits just below there at 129.40. Notice that the RSI has been in negative territory since the end of July, and although it tried to move back into neutral territory, it was unable to do so and has turned lower once again. If price does manage to move higher, the August highs at 169.85 act as first level of resistance, then the 200 Day Moving Average at 178.15. The gap opening, from July 29^th to July 30^th, acts as the next level of resistance near 194.15.

Source: Tradingview, Stone X

If the world continues to see worsening manufacturing data and/or a rise in coronavirus cases, Iron Ore may continue to be pressured further. However, with price at the 50% retracement of the February 2020 low to the May 2021 high, along the RSI in oversold territory, Iron Ore prices could be ready for a bounce.

Learn more about commodity trading opportunities.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.