Commodities Focus: US infrastructure deal announcement could boost base metals

Friday, 25th June 2021 09:42 - by Rajan Dhall

Commodities

Base metals and commodities markets are still suffering from the China inflation crackdown story. All throughout the week, there has been more information from the Chinese NRDC. The group is now staying they are visiting the Beijing exchange to look at sales and ledgering to make sure there is no hoarding of material to prop up prices. The release of strategic commodities reserves in China has also affected prices and iron ore in particular was hit earlier on in the week. There is now the question of when this information is fully priced in. Some base metals have started to balance out after the news but lots of analysts are looking for consolidation breakouts from here.

On Thursday night there was some good news in the commodities markets as U.S. President Joe Biden and his administration agreed on a bipartisan infrastructure deal with the rest of the senate. The agreement is worth $1.2tn and the eight-year plan includes funding for roads, bridges, the power grid, public transport and the internet. Looking at companies like Freeport McMoran and Southern Copper could give us a clue at the open on Friday as optimism could be high following the announcement.

Looking at the daily copper futures chart below there has been a nice price bounce off the previous value area from the distribution under the current price. The purple shaded area represents a high volume node (HVN) and this represents the area where most contracts have been traded in that area. Looking up, the next major sticky area could be the red zone at around $4.52/lb and then the high on the chart of $4.88/lb. In the background of the chart, there is an expanding wedge type formation but the lower trendline is in focus at the moment and any break below that zone could be significant. For now, the uptrend remains intact and a move above $4.50/lb is the next key zone.

Source: TradingView

WTI has to have a mention this week. As travel and economies open up the price of oil has moved significantly higher this week. The chart below is the monthly futures chart and I do not often post monthly charts but there is a big level that needs to be noted at the green shaded area ($74.50 and $76/bbl). If the price does bounce off the zone there is another support at the red zone ($62.50/bbl) which was used significantly a few times in the recent past. Many analysts have been noting that lots of call options are being bought for $100/bbl. The level is pretty far away but it is nice to note where exactly on the chart it resides. 

Source: TradingView

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