In some good news for the Australian economy, it looks like the medium term bottom is in for the iron ore price:
That’s an encouraging table with the entire steel complex on the up. Here are the charts:
My retest of the lows looks to have already happened and moved on. Indeed I think it’s time to turn our attention to where the rally might get to.
The $120 area looks like it will create very serious resistance as it was the area of former downside support for traders. Many of those will be nursing losses from this entry point and will no doubt be keen to lighten up on some of the massive inventories that seem to have been largely untouched as this price correction transpired and cheaper stock was available in the spot market.
So, in a terrible act of irony, the $120 area could now become the new ceiling for the iron ore price. Technical analysis supports this thesis too with the area of support during the old head and shoulders pattern now marking resistance. For 12m swaps that is right on $120:
And for spot it’s $130:
We shall see.
I more bold conclusion is that the pipeline of Chinese stimulus projects is now having some impact on demand and that Q4 Chinese growth will show the bottom of the current slide in GDP. I expect no “v-shaped” recovery.
