Copper Reversing

Copper prices are reversing sharply ahead of the weekend with the futures market extending the correction lower from the failure at 4.1585. The move lower comes amidst fresh strength in USD on the back of the FOMC this week. While traders initially reacted by selling USD, it seems that once the details of the event were digested (inflation and growth revised higher), the impetus to sell USD was not as strong as first thought. With USD rallying, we’ve seen risk assets weakening across the board, including commodities such as copper. Indeed, despite the Fed reaffirming its view that 3 rate cuts are still likely this year, USD strength suggest some disconnect with the market’s view.

China Industry Action

Away from movements in the US Dollar, traders are also watching developments in China. Major copper producers are due to meet next week for their quarterly meetings are traders are watching to see if there will be any further news regarding production quotas. Leading smelters recently announced production cuts in a bid to cut to costs after refining fees surged over the last year. If any further action is announced this could see prices turning higher once again.

US Data Due

Next week, focus for metals traders will likely stay with USD with a slew of key US data due. If we see any further data outperformance, this should keep USD supported near-term, weighing on copper. On the other hand, any data undershoots should see some USD unwinding helping support risk assets.

Technical Views

Copper

The rally has stalled for now into the 4.1585 level with price since reversing back down to test the 4.0150 level. With momentum studies bearish, focus is on a continuation lower near-term with 3.9410 the next support zone to note. Bulls will need to defend this area to maintain the recent breakout and keep focus on a resumed move higher medium-term.