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Iron Ore Under Pressure

Iron ore bulls will be hoping that the current weakness in USD extends further today, helping stem the sell-off in the metal. Iron ore futures have shed around 13% so far this year as concerns over the health of the Chinese economy have weakened the demand outlook for the metal.  Issues within the property sector have prompted a drop in demand from the Chinese steel sector, the world’s largest consumer of ire ore. While the Chinese government continues to take measures to help bolster the property sector, these measures are yet to translate into broader demand for iron ore, keeping the metal pressured lower for now.
 

Hawkish Fed Expectations Weighing

The uptick in hawkish Fed expectations over recent months has also added to iron ore’s woes. With US data remaining surprisingly robust over the end of 2023 and early 2024, the Fed has pushed back against calls for near-term hikes. Pricing for a rate cut in March, which had been as high as 70% ahead of year end, dropped back to around 0% over January. The accompanying rise in USD has put heavy pressure on iron ore prices and despite the weakness in USD today, risks of a fresh uptick in USD are a key threat to commodity prices across the board, not just iron ore.
 

US Data Due

Looking ahead today, the focus will be on the latest set of US PMI readings. Given the downturn in USD currently, any weakness in these readings is likely to see current selling increase, allowing room for iron ore to rebound. However, should today’s data surprise to the upside, this will likely help revive USD demand, sending iron ore prices lower through the end of the week.

Technical Views

Iron Ore

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The sell off in iron ore has been framed by a narrow bear channel this year. Price is now once again testing support at the 125.45 level. With momentum studies bearish, risks of a downside break are seen, putting 115.80 in view as the longer-run bear target unless bulls can get back above the 131.60 level near-term. 

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