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Iron Commodity USASun Storm Investment Trading Desk & NexGen Wealth Management Service Present's: SSITD & NexGen Portfolio of the Week Series
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By Sun Storm Investment Research & NexGen Wealth Management Service
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UK and Japan tarrif talks may end HRC rallyUS Relaxes Tariffs on Steel and Aluminum from Europe, Looking Next to UK and Japan
The US and the EU have reached an agreement that will replace Section 232 steel and aluminum tariff against EUs 27 countries with a quota system that could result in lower steel prices.
There had been speculation for months that the sides would come to an agreement by November 1.
Now we have fresh news:
Bloomberg: Biden Commerce Chief Says U.K., Japan Steel Talks to Start Soon
The U.S. expects to begin talks with the U.K. and Japan aimed at addressing the nations’ objections to steel and aluminum tariffs “reasonably soon,” and any solution must protect the American industries, President Joe Biden’s commerce chief said.
Secretary Gina Raimondo said that she plans to discuss the steel issue with Japanese officials when she visits Tokyo next Monday on her first trip to Asia since taking office in March. The talks would follow a U.S.-European Union truce last month that allows the allies to remove tariffs.
Buy the rumors and sell the fact.
A potential deal with UK and Japan for tariff removal may ease the stell prices.
Near term targets are mentioned on the chart
Commodity prices: Iron OreFrom mid-September until the end of October, Iron Ore appeared to have found a safe space above US $100. Now, after a steep decline beginning October 27, 2021, Iron Ore has started to test May 2020 lows, close to US $90 per metric tonne. The commodity is grating against predictions by ANZ Bank (ASX: ANZ) for it to “find a floor around current levels”.
Demand (or lack thereof) from China is what has driven the price of Iron Ore sub-100 dollars. Chinese authorities have ordered its steel manufacturers (large consumers of Iron Ore) to cut production to meet targets to reduce energy consumption and pollution across its provinces. China’s production restrictions are scheduled to last until mid-March 2022.
According to S&P Global, Iron Ore outlook is unfavourable, with “pricing risk is to the downside” as supply tends to increase in the latter half of the year.
IRON Short - Aust Iron prices tanking - China SlowdownSUMMARY: Short, Australian primarily delivers to China. Demand is falling fast suggestion a sharp contraction is around the corner for China, it will be the first in decades.
This is a good indicator to forecast China's future growth/contraction pace.
S&P500 below is another good indicator to view in tandem.
Iron Ore Weakness May Continue as Death Cross Looms An incoming Death Cross formation may add to iron ore's downside in the coming weeks. The 50-day Simple Moving Average is on track to intersect the 200-day SMA. Prices found support at the September 2020 high, but the path of least resistance appears to be to the downside with a descending channel.
Is the bullish move of IRON ORE halted ?First I urge you to look at a weekly candle/bar chart of the commodity. Can you see the strong bearish reversal candle/bar ? This suggests correction in the short term is upon us. To early to forecast the magnitude of this correction which may even turn out to be major trend reversal. More data is required for this. Fact that the price action is at a significant resistance is worth watching our weekly candle/bar charts for further weakness at current levels.
Why bother at current levels with this analyssis ?
Proof is in the pudding(see the published Point and Figure chart and the Bullish Price Objective from the base pattern). This suggests a potential end to the bullish move at current levels which is evident form other chart types.
Correction for now is what I am saying.
Weekly candle/bar charts will offer clearer view in regards to what may be unfolding.
Iron Ore - where to next?Thanks for viewing. This will just be a short one. My reasons for bearishness are:
- bearish RSI divergence (higher price high shown as a lower high on the RSI - at a minimum indicates reduced momentum but normally precedes changes in price direction),
- MACD histogram is trending downward quite steeply,
- MACD moving averages look like they are starting to head towards a cross-over to the downside,
- Declining volume over the past 18 months (seems to average over 400 in May 2019 and is about 120 now),
- A generalised global industrial slowdown.
I may be wrong, or I may be right but just too early, and there may be residual upside remaining. Medium term I see price heading back to ~$40 level.
Protect those funds.
Iron Ore FuturesNoticing: The volume on the Iron Ore China (62% FE Fines) Future always spikes at the start of a new month, declining in the weeks ahead. Coinciding with new orders at month end/start? At current levels, IO remains above it's 8-day EMA but may be vulnerable to a bearish reversal. The RSI is signaling bearish divergence (lower highs) while the MACD has a pending bear cross. Price also becoming extended above the 200-day SMA. Current level: 103.10
Bonus Chart: Iron Ore weaknessIron ore futures is reversing upon a weekly stretched ABCD completion which is confirmed by price action hitting SSR resistance and breaking down below key MA support.
Iron ore prices has been supported largely by supply issues but demand is being tested this trade war. Not sure those highly indebted property developers in China, especially those which have been gouging on USD debt, will be building much in the next year or so.
