- China’s Politburo indicates a strategy of "moderately loose" monetary and enhanced fiscal policies for 2025, akin to past responses to economic crises.
- Iron ore prices reach a two-month high, successfully surpassing the resistance level at $106.
- Copper begins to recover from its downtrend but encounters resistance at the 50 and 200-day moving averages.
- Attention is focused on the upcoming CEWC for further details on stimulus efforts, which should support the metals market.
Economic Insights
China’s top decision-making body announced intentions for a “moderately loose” monetary stance along with a more aggressive fiscal strategy for the next year, prompting a wave of optimism as it mirrors language previously employed during financial emergencies. Although specific measures remain unconfirmed, the announcement raises expectations for actions aimed at revitalizing the domestic economy in the coming months.
The comprehensive stimulus spending during past crises, particularly during the global financial crisis and subsequent pandemic, has set a precedent, making the recent uptick in industrial metal prices, including iron ore and copper, a predictable reaction. This surge occurred ahead of anticipated discussions at the Central Economic Work Conference (CEWC) scheduled for later this week, where more concrete plans may be revealed.
The CEWC's timing is pivotal, as it outlines the economic agenda for the coming year. The fruitful discussion following the Politburo's announcement could sustain positive momentum across Chinese financial markets, including commodities, equities, and indices.
Iron Ore's Bullish Trends
Iron ore trading at SGX has recently achieved a two-month peak, breaking through the resistance threshold of $106 that had hindered price progression multiple times in recent months. The bullish market indicators—including a bullish engulfing candle from Monday, alongside positive MACD and RSI readings, and the breakthrough of the 200-day moving average—suggest that the path forward could lead to a potential retest of $109.05. If this level is surpassed, the next significant challenge looms at $114, which has historically repelled bullish attempts since June.
Traders considering bullish positions might look to use $106 as a strategic stop-loss point, facilitating the establishment of long positions above this price level while keeping a narrow stop-loss just below it or the 200-day moving average for added security.
Copper's Resistance Levels
Copper markets have reacted positively to the signaling from China's Politburo, breaking a prolonged downtrend that had persisted since late September. However, it has met resistance just below the important confluence of the 50 and 200-day moving averages. The 50-day moving average has been a significant indicator throughout the year, aside from the volatility observed around the recent US elections.
While bullish signals from MACD and RSI are noteworthy, it’s advisable for traders to await a decisive break above the moving averages before initiating any long positions. This strategy allows for the placement of protective stops beneath these levels to guard against potential reversals. Target levels for potential trades could include $4.50 and upward towards $4.79, contingent on the scale and impact of the forthcoming stimulus announcements.
