Iron Ore Rally Continues

Iron ore prices continue to rally on Thursday as the metal enjoys further demand on the back of this week’s Chinese stimulus announcements. A slew of measures from Chinese authorities, including PBoC rate cuts, liquidity packages for stocks, reserve-ratio easing for banks and mortgage reductions for the property sector, have all contributed to more bullish sentiment in metals this week. Iron ore prices had been under heavy selling pressure over the year in response to rising concerns over the health of the Chinese economy. Bulls are hopeful that this wave of measures can help create a base in prices to begin to recover from.

Fed Impact

Along with the stimulus announced in China this week, iron ore prices are also being helped by a weaker outlook for the US Dollar in response to growing Fed easing expectations. On the back of the half-point cut announced by the Fed this month, traders are now expecting the bank to press ahead with further easing in November with the potential for a further cut in December.

Bullish Outlook

If this narrative gathers traction, USD looks poised to weaken further near-term, offering continued support for metals. Looking ahead today, traders will be watching the latest round of US data along with a series of Fed policymaker comments also on deck. Any USD weakness in response to today’s data and events should help underpin iron prices further ahead of the weekend.

Technical Views

Iron Ore

For now, the sell off in iron ore has stalled into the 657.20 level. Price has since bounced and is now testing the bear trend line from June highs and the 739.14 level. Bulls need to get back above this level to alleviate near-term bearishness and put focus on a test of the longer-term bear trend line and 815.80 level next.