PALLADIUM TODAY: Prices hold up in high ground

Short Term:
Medium Term:
Long Term:
Resistances:
R1 815 March high
R2 816 High so far
R3 833 HRL March 2015 peak
R4 911.50 HRL Sept 2014 peak
Support:
S1 796.50 Former resistance
S2 787 20 DMA
S3 741 Feb 3 low
Stochastics:Bearish-to-neutral
Legend:

DMA – daily moving average
Fibo – Fibonacci retracement line
(H)SL – (horizontal) support line
HRL – horizontal resistance line

Technical Comment

Analysis

  • Prices are consolidating while they absorb selling, having broken up through resistance at $797 per oz on Thursday March 23 and then setting a fresh high at $816 on April 5 – the highest since May 2015. 
  • The overall trend looks strong. The recent low was above the January low at $711 per oz and well above the UTL, which is now at $710 per oz, suggesting good underlying support.
  • Judging by the previous peaks ahead of $800 per oz, it looks as though there was scale-up producer selling above the market. Now prices have moved up through $800, we wait to see where the next selling levels are.
  • The long-term chart (not shown) shows a band of supply running up to $833 per oz, which is likely to be the next target. 

Macro factors

ETF investors have returned as light buyers in recent days, but generally interest seems good in the metal, which is surprising considering the strong upward price trend. 

With palladium’s use tied to the automotive market, we are wary about the metal’s timing in pushing higher; if anything, the Chinese automotive sector looks set to weaken after a very strong 2016 while US auto sales have also come off the boil slightly.

Conclusion

Palladium’s bull market has followed a choppy path for most of 2016, involving some large pullbacks along the way; this pattern seems to have rolled into 2017 too. Until recently, better economic data pointed to a stronger demand outlook; but although we expect general economic data to continue to improve, we also expect some slowdown in the auto industry, especially in China, but also in Europe and the USA.

We have said we are not overly bullish about palladium prices at these levels unless investor interest picks up considerably. If ETF and funds do not start to increase exposure, we would be cautious about this breakout.

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.
Kathleen Retourne

About Kathleen Retourne

Kathleen has been reporting on commodity markets since 2006. She joined FastMarkets in 2011 and has immersed herself into the metal industry, specialising in LME coverage. Follow her on twitter @kathretourne