Talking Points:

  • December China trade balance beat expectation withimprovements in both imports and exports
  • Gold resumed slide as investors curb safe haven trades
  • Oil benefited from risk rebound although fundamentals and price forecast remain weak
  • Copper ticked up with growing China imports

China trade data for December today beat estimates at $60.09 billions. Imports year-on-year fell -7.6%, less than -8.7% prior and -11% expected by Bloomberg’s survey of economists. Exports improved from -6.8% year-on-year previously to a mere -1.4%.

These are good signals for both material imports into China, and the export-reliant Chinese economy. Accordingly, the AUD, oil, and copper retraced levels prior to yesterday’s risk rout.

Oil price recovered modestly to the high 30s – low 31s, after dipping under $30 for the first time since 2003. The U.S. Energy Information Administration revised its 2016 forecast of WTI price lower by 24 percent, to $38.54 a barrel. A little demand positivity came via a surge in China’s imports to a record 334 million tons last year, thank to the price crash.

Nevertheless, projected future oil prices – reflected in forward curve – have shifted downward across all time periods onto year 2021. This parallel shift lower and a flattening back end of the curve signal increasing market negativity with no hope for a recovery. This may prompt people to sell even more.

Commodity Rebound Gathers Pace after Strong China Trade Data

Gold price resumed its slide into last week’s price range after earlier short-lived rally. As risk assets set on a recovery after a bad start of 2016, gold price gave back all gains made since January 7. More positive news from China or the US could send gold back below a past support-turn-resistance level at 1082.4.

Copper price ticked up lightly before positive China data then a rise in copper imports effectively suspended downside movement. Report by China Customs General Administration showed copper imports rose to 530,000 tons in December, from 460,000 tons prior. These data should provide additional support to copper’s rebound from a 6-year low yesterday.

GOLD TECHNICAL ANALYSIS – Gold price parks on 10-day moving average at 1084.5 on a 4th day of declines. A break below this and toward 20-day moving average would signal trouble to gold and thwart chances of a recovery. Downward momentum indicates lower moves to come.

Commodity Rebound Gathers Pace after Strong China Trade Data

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price dipped to more than six-year low of 1.9525 before it bounced back to 1.97 area. It is too early for a call of copper rebound and downside moves may return, unless momentum picks up. These levels offer dip buying opportunities, although caution should be exercised.

Commodity Rebound Gathers Pace after Strong China Trade Data

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil price picked up to trade around previous support level at 30.88, after it dipped below $30 in New York. Downside momentum starts to flatten although an upturn would be better confirmation for an oil recovery. Similar to other commodities, dip buyers could find opportunity here, in anticipation of further retracement.

Commodity Rebound Gathers Pace after Strong China Trade Data

Daily Chart - Created Using FXCM Marketscope

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

Contact and follow Nathalie on Twitter: @nathuynh