Copper Plunges From Record Highs
Huge Copper Volatility
It’s been a wild week for copper futures traders. After surging to fresh record highs midweek, the futures market reversed and plunged lower yesterday as USD rebounded on fresh safe-haven demand. Traders have been spooked by surging oil prices this week as the conflict in the Middle East continues to escalate. There is also an element of bullish copper sentiment having become too stretched as a result of speculation ahead of expected US tariffs on copper. Chatter going round suggesting tariffs might not materialise saw a swift covering of late longs, adding to the reversal lower. Traders will remember the violent downside reaction we saw last year when a similar situation occurred; traders were buying huge amounts of copper ahead of expected tariffs which were ultimately cancelled leading to a plunge in copper prices.
Inflation & The Fed
Looking ahead, the rebound in USD is important here and with US inflation due today and the September FOMC next week, there is strong potential for a continued USD rally which could see copper prices pulling back lower near-term, particularly if energy prices continue to rise and USD safe-haven demand rises accordingly. An upside surprise in today’s US CPI print would be seen as confirming a hike next week, sending USD higher into the weekend and copper lower. However, if CPI comes in soft, like we saw with PPI yesterday, this should cast doubt over a hike next week, capping the rebound in USD for now. The caveat to this is that even with a disappointment today, USD can still rally via safe haven demand if we see a further rise in oil prices. As such, USD risks remain skewed higher and copper remains vulnerable to further downside.
Technical Views
Copper
The reversal in copper has seen price plunging form highs above 6.8615, breaking below the rising trend line from YTD lows and below the 6.5830 level too. While below here and with momentum studies turned bearish, focus is on a continued move lower back towards 6.2845 next and 6.1090 below.
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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.