The Upside Rally For Iron Ore!

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Supported by strong demand for the steel making raw material Chinese iron ore futures showed 2% upside rally on Monday, which was recorded as the highest in almost last eight months.

According to the data released by the Steel Home consultancy, Iron ore inventories at major ports of China recorded a drop of 150,000 tonnes at 143.85 million tonnes in comparison to the inventory recorded last Friday. High production of steel along with heavy usage of iron ore at major ports of China were the contributing factors for this upside rally. Daily crude steel output recorded rise of 2.7 million tonnes in the month of September on account of strong profit margins posted by the top producers. China has allowed local government to set their own production limits replacing the implementation of blanket curbs thereby reducing the tough restriction imposed earlier and offering more leniency on production limits. Industrial firm faced slow growth for the fifth consecutive month with a record decrease of sales of raw materials and manufactured goods in the month of September, pointing to lower domestic demand. Port stocks have posted a drop of almost 11% after touching and making the record high levels of 161.98 million tonnes in the month of June. The most traded commodity (January iron ore) on the Dalian Commodity exchange raised by almost 1.4% at 542 yuan. Data report released by Steel Home reported that prices of spot iron ore delivery to china touched $76.4 tonne on Friday, highest since early March. 

Iron ore has posted 0.67% increase of 0.5 USD/MT to 75.50 on Friday October 26., which remained unchanged as compared to the previous trading session. The commodity has touched an all-time high of 191.90 during February 2011 and touched the all-time low of 37 in the month of December 2015.

Technically on one-month chart, the commodity has formed strong support near the levels of $56.01-$60.31. Breaching of these levels will take the commodity further down till next major support levels. However at current scenario charts remain intact holding more on upside momentum, indicating strong demand. Levels of $75-77.46 remain to be strong resistance zone. Level of $77.46 will be a strong resistance level, since the level has played the role of current year high. The prices will indicate some corrections once the same touch the levels of $77.46. Formation of double top can occur on the price charts, indicating trend reversal. Commodity is currently trading near the mean deviation of Bollinger bands with no negative divergence. Relative Strength Indicator at the levels of 50.3 with positive divergence, MACD in sync with the signal line, commodity channel index supporting the overall bullish view is set up on the charts. On shorter time frame levels of $69.3 remains minor support zone and closing below these levels will be the first signal for the trend reversal which will further be confirmed after the formation of any reversal pattern at those levels .

Lately, the price for benchmark 62% iron ore fines rose to $76.48 a tonne, but has been below the resistance zone, and indicate slight pressure on account of disturbed economic environment faced by Chinese economy.


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