Iron Ore, Copper: Sparks fly as China sets stage for super stimulus

• China’s Politburo signals "moderately loose" monetary and more proactive fiscal policy for 2025
• Iron ore surges to two-month highs, breaking resistance at $106.
• Copper breaks its downtrend but stalls at the 50/200-day moving averages
• Eyes on CEWC for further stimulus details, keeping metals buoyant

Overview

China’s Politburo plans “moderately loose” monetary policy and “more” proactive fiscal policy next year, echoing phrases last used during the global financial crisis (GFC). While short on specifics at this point, the explicit signal immediately sets high expectations for measures to boost domestic activity in the months ahead.

Given China’s record stimulus spending during the GFC, only exceeded by pandemic-era measures, it’s no surprise industrial metals like iron ore and copper have surged on the news, especially as no announcement was expected before the Central Economic Work Conference (CEWC) later this week.

The timing of the CEWC, which outlines China’s economic roadmap for the year ahead, means the buzz from the Politburo’s pre-emptive move could keep Chinese markets, including commodities, stocks, and indices, buoyant for days.

Iron ore sending bullish signals

Source: TradingView

SGX iron ore closed at two-month highs in overnight trade, breaking above resistance at $106 that had capped gains on several occasions in November and December. The bullish engulfing candle from Monday, combined with bullish signals from MACD and RSI (14) and break above the 200-day moving average, points to the path of least resistance being higher near-term, bringing a potential retest of $109.05 into play. If that were to be taken out, a far tougher test awaits at $114, a level that has successfully repelled bullish probes on three separate occasions since June.

Those considering bullish setups could use $106 for protection, allowing for longs to be established above the figure with a tight stop beneath it or the 200-day moving average for protection.

Copper set to test key 50DMA

Source: TradingView

COMEX copper reacted to the stimulus signal from China’s Politburo, breaking the downtrend it had been sitting in since late September before stalling just below the intersection of the 50 and 200-day moving averages.

The 50-day moving average has been highly respected this year outside the messy price action during and immediately after US election day, making it a particular focal point.

While MACD and RSI (14) are generating bullish signals, it would be preferable to see copper break above these moving averages before initiating bullish positions, allowing for traders to place stops beneath for protection against reversal.

Potential trade targets include $4.50 and even $4.79, depending on the scale of stimulus measures announced.

-- Written by David Scutt

Follow David on Twitter @scutty

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