Copper Falls Despite Trade Deal News
Copper prices are reversing from three-month highs ahead of the weekend with the futures market coming under heavy selling pressure on Friday. Copper prices are now down almost 5% from the 3-mth highs printed on Wednesday. A hawkish shift in Fed rate expectations on the back of the FOMC this week has seen USD soaring higher, putting pressure on risk assets across the board. Coppr prices had been on a firm run higher over recent weeks, reinforced by firmly dovish Fed expectations. Indeed, the US govt shutdown was seen as likely increasing the need for additional Fed easing. However, the Fed caught traders off-guard this week warning that the shutdown was creating a barrier to furtehr easing, namely due to the lack of labour market data which Powell cited as causing division among policymakers. With traders now readjusting their Fed rate expectations, copper could see a deeper push lower if USD continues to advance near-term.
Weak China Data Weighs
This shift in Fed view looks to be outweighing the positive impact of the US/China trade deal announced this week. The sell off in copper has been amplified today by weak data out of China overnight. The Chinese manufacturing PMI was seen plunging last month to 49, down from 49.8 prior. The move deeper into contractionary territory, marking the biggest decline in six months, is a worrying signal for copper demand there. Looking through the sub-components, there was heavy weakness through the data with new orders, output and foreign sales all tanking. Given the macro mix currently, copper looks vulnerable to further downside near-term accordingly.
Technical Views
Copper
The rally in copper has stalled for now with price reversing back under the 5.1985 level. Given the bearish divergence in momentum studies, the risks of a double top reversal here are growing. 4.8010 will be the key level to watch near-term with a break of that zone likely to ushed in fresh downside momentum. While that level holds, however, focus is still on a fresh push higher with 5.4415 the next bull target.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.