Charts Of The Day: Commodity prices under pressure

Market Analysis / 4 Min Read
Milan Cutkovic / 25 May 2021

Highlights:

  • Commodity prices came under pressure after China signals measures to cool soaring prices
  • While metals struggle, Oil prices continue to march higher
  • Global equity markets extend gains, with tech companies leading the recovery
  • Gold rally loses some momentum, but the weak USD keeps it at lofty levels

Copper

Commodity prices came under pressure after China expressed concern about "excessive speculation" and signaled that it will take measures to cool soaring prices. It was primarily steel and iron ore that experienced a sharp sell-off on Monday, but other commodities had a weak start to the new trading week too.

Copper extended losses and could soon test the 4.3750 support level. Traders will be keeping a close eye on the rising trendline from the February low as well, which should act as support. A clear break below 4.3750 could pave the way for a deeper correction towards 3.94. However, positive RSI divergence on the H1 chart is hinting at a short-term recovery, with 4.6220 the next notable resistance level.

Oil Markets

While metals are struggling, Oil prices continue to march higher. Traders are optimistic that the market can absorb an increase in Iranian oil supply, should the talks between Tehran and Western powers in Vienna result in a lifting of sanctions. At the same time, the reopening of the European economies and a strong US economic recovery are fueling expectations that demand will pick up in the second half of the year.

USOIL is approaching a zone of major resistance between $66.70 and $67. The RSI on the H4 chart is not hinting at overbought conditions yet, so there might be further room to the upside. Should USOIL manage to overcome the hurdle at $67, a continuation of the recovery rally towards the 2021 high at $68 appears likely.

US30

Global equity markets extended gains on Monday, with technology companies leading the recovery. Inflation fears are unlikely to disappear anytime soon, but have eased somewhat as investors focus on rising growth expectations in the United States and Europe.

The US30 is still struggling to clear the resistance zone between 34,410 and 34,500 points, with the former level being the 61.8% Fibonacci level of the May sell-off. A clear break above the 34,500 level would pave the way for a continuation of the rally towards the all-time high. However, the resistance zone is likely to prove to be a tough barrier once again and US30 bulls will need to hope for a new catalyst that could give the index a boost. To the downside, support is seen at 34,153 points, followed by 34,082 and the support zone between 33,637 and 33,684 points.

Gold Markets

The Gold rally lost some of its momentum recently, but the weak US Dollar is keeping it at lofty levels. XAU/USD will likely test the $1898 level soon, which is the 78.6% Fibonacci of the January-March decline. A clear breakout above this level would signal that the precious metal could extend gains to the $1959 in the near-term. To the downside, Gold bulls are keeping a close eye on the 200 DMA and the $1850 support level.

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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