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Palladium Price Drops 1.48% As Chinese Lockdown Concerns Emerge

This Wednesday, the Palladium price activity has taken a nosedive after the metal asset lost earlier gains. It is now trading 1.48% lower as Chinese demand concerns emerge. 

COVID-19-related lockdowns in China continue to put pressure on industrial metals, and these concerns have resurfaced after China’s National Health Commission reported more than 1,000 new COVID-19 infections on 19 July. This represented an increase above the 776 new cases that were found a day before. China has a zero-COVID policy which stipulates strict lockdowns in districts where new cases are found. 

China’s lockdown concerns have stymied two days of gains in Palladium. These gains were brought on when investment bank HSBC cut its outlook for Palladium production in North America from 930,000 tonnes to 785,000 tonnes. This new outlook represented a fall below 2021 production figures which stood at 874,000 tonnes.

Commodities had ridden two days of gains as investors sold the dollar and assumed a risk-on sentiment. However, aversion seems to have come back into the market. As it stands, China is one of the world’s largest consumers of industrial metals, and lower demand from lockdown situations will apply a cap on gains on Palladium going forward.

Palladium Price Forecast

The evolving bearish flag points to the potential for a further downside move on the metal asset. This outlook would require a breakdown of the flag at the 1853.21 support (28 June and 18 July lows) for confirmation. This sets up a potential measured move that should achieve completion at 1768.77 (13 June 2022 trough). Obstacles at 1821.33 (17 July low) and 1796.21 (19 June 2022 low) must be degraded by the bears to make way for this measured move. 

Conversely, the bearish flag is invalidated if a price bounce on the 1853.21 support takes out the 1895.89 resistance formed by the 19 July prior high. This opens the way for the bulls to seek harvest points at the 1942.33 resistance (1 July high), before 1970.44 enters the mix on successful clearance of the 1 July peak. 2003.45 becomes an additional target point to the north if the 1970.44 barrier gives way.

XPD/USD: 4-hour Chart