Iron ore feels the weight of demand concerns

Commodities were under heavy selling pressure at the beginning of the week due to demand concerns stemming from lockdowns in China. It has also weighed on global equity markets as investors are pricing in slower global growth.

Iron ore didn’t escape the volatility and it fell as much as -11% on Monday as it tracked Chinese stainless steel futures lower. However, on Tuesday the government vowed to support the economy which allowed iron ore to recoup much of Monday’s losses.

With prices hovering below a key level of resistance it could be make or break for iron ore. The market now needs to decide whether it can continue its uptrend or retrace further from its 10-month high, set earlier this month.

Iron ore is within an uptrend on the daily chart, although it is currently retracing against that trend. If it reverts to the bullish trendline form the November low it could be headed towards 760 – 780 (depending on how quickly it tries to get there).

On Monday prices broke beneath 883.2 support and confirmed a double top pattern. If successful, the double top projects a target around 813. However, 883.2 remains an important level to monitor as prices tried to retest it yesterday.

A break above 883.2 resistance invalidates the double top pattern. Traders could then wait to see if it is then respected as support before considering long opportunities.

On the hourly chart we can see yesterday’s high respected a 38.2% Fibonacci level, just below 883.2 resistance. Bullish momentum of yesterday’s rally is also softer which shows momentum is weakening, and prices are coiling up within a potential rising wedge pattern.

We are now looking for evidence of a bearish reversal pattern around (or below) nearby resistance levels. A break beneath 856 could assume bearish continuation and brings the doble top target around 813 back into focus, with support levels around 780 and 800 also making potential targets for bears.

How to trade with City Index

You can trade easily trade with City Index by using these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.