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Commodities Hit by Demand Jitters After Soft China Trade Data

Commodities Hit by Demand Jitters After Soft China Trade Data

Nathalie Huynh, Contributor

Talking Points:

  • Gold halted decline post Non-farm Payrolls
  • Oil fell as U.S. producers added rigs
  • Copper hit fresh low on concerns of China demand slowdown

China trade data was released on Saturday with an all-around slump in trade surplus, imports and exports. This deepened threats that demand from China may slow down in the foreseeable future, and sent commodities prices down together with commodity-currencies. China is the world’s largest consumer in copper and gold, and presently the biggest crude oil importer.

Gold halted its week-long decline in the US session as investors took profit on long USD bets after Non-farm Payrolls (NFP) data. The solid NFP and Average Hourly Earnings further affirmed projections for a September rate hike. The upside of gold remains capped however, as zero-yield gold will likely lose out to yielding-assets as interest rates ‘normalize’, or returning to higher levels before a cycle of quantitative easing.

Gold held steady in morning Asia trade at the smallest drop among other major commodities, still weighed down by China data.

Copper hit a fresh six-year low at its opening in the Asian morning and has since recovered modestly to scale down the loss to 0.28 percent. Prices of other industrial metals also dropped.

An oversupply in copper and uncertain demand from China heightened its bearish outlook. Copper stockpiles in Shanghai jumped 11 percent last week. Statistics from the U.S. Commodity Futures Trading Commission showed that investors put on the most bearish bets since April 2013.

Oil prices declined on a fourth day as U.S. producers continued to add rigs amid a global supply gut. Baker Hughes rig count presented a third weekly increase with 6 extra rigs. Weaker demand growth and oversupply continue to push oil prices downward and prolong a bear market for oil.

GOLD TECHNICAL ANALYSIS – Gold extended the upside today with further recovery indicated by momentum signals. The 1071-1109 range still captured daily price action however. The gold bears may look to sell rallies up to the upper bound of 1109.8 or 20-day moving average at 1103.5. A break of the 20-day moving average would be an early sign of a rebound and that prices have bottomed out, otherwise gold prices likely remain in a sideways fashion.

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper is extending higher in the morning after a plunge at today’s opening. Intraday momentum signals further upside and copper may return to fluctuating around the 2.3350 pivot level as in the last session. However there is no clear sign that the rebound may carry above this pivot, with daily chart still showing a downtrend signal.

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – There is no stopping to the slide in WTI Oil as moving averages present a clear downtrend signal and prices consistently stayed below the 5-day moving average. The oil bears may keep their stops trailing this indicator with leeway for correction periods. The next firm support level from here is at 42.01.

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com

Contact and follow Nathalie on Twitter: @nathuynh

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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