China’s Q1 economic growth slowing down.
The year 2020 has begun with a black shadow. The political situation in the Middle East is hot after the murder of the Iranian General and the Coronavirus Epidemic surprise in Wuhan.
Industrial activity in China can slow down in the first quarter of 2020 due to the long holiday of the Chinese New Year, but the threat of the virus will prolong the slowdown if there is no prevention against this epidemic. As of recent developments, the virus has infected more than 2,700 people and killed at least 80 people, mostly in the Hubei province and its capital Wuhan.
Meanwhile, New Year holidays have been extended, something that tends to add pressure on imports, as all factories are shut down and there are delays in imports and exports. This can also disrupt the industrial sector and encourage Chinese processors to stockpile existing base metal stocks, instead of buying new materials.
Base metals and iron drifted lower this week. The decline in demand was related to the fears over the virus spread and the concerns over the potential impact on the Chinese economy. Additionally, the strong US Dollar also weighed on the commodity market, with the USDIndex rising to 1-month highs at 97.8. Precious metals are performing well because traders and investors increased allocations for safe-haven assets. Gold recovered to $1,580.
Looking ahead, the Fed will meet this week and is expected to keep interest rates unchanged for now. Forecasts hold towards a lower interest rate rather than a higher one in 2020.
Trader’s concern about contagion (and mutation) of the coronavirus could erode demand for raw metals and base metals in China. Copper slumped on Monday amid growing concern that the spread of the coronavirus could erode demand in China, the world’s biggest industrial commodity consumer. Copper futures lost –3.3% and settled at 2.5860, which is the lowest price since October.
Resistance of the asset sits at the peak of the year, at 2.8800, which coincides with the top line of the up channel seen since August 2019. Meanwhile, bearish divergence has been identified the last 2 months between the price action and momentum indicators. This has already been validated with the fall of copper since mid-January. The price has broken the Support level at 2.6069 (November-December Support), while the RSI and MACD present the negative sentiment since they have turned below neutral. The next Support level is 2.5621 and 2.5228, while immediate resistance is at 2.4770 .
Market Analyst – HF Educational Office – Indonesia
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.