Copper Capped As Oil Surges
Copper Rally Pauses For Now
Copper prices remain on watch through the back of the week following the sharp rally we saw on Tuesday which pushed copper futures up by almost 4% on the day. The move has stalled for now into the 6.5830 level, but the backdrop remains bullish and focus is on a further push higher. Copper premiums in China have ballooned recently as warehouse inventories continue to get run down leading to a jump in import demand. This jump in demand comes at a time when output in Chile, the world’s leading producer of copper, has fallen to multi-year lows due to a string of factors such as ongoing sulphuric acid shortages, site maintenance and extreme weather event and labour shortages. As such, the drop off in supply from the largest global producer and the uptick in demand from the largest global consumer is helping keep the near-term outlook firmly bullish.
Oil Prices & Inflation Expectations
However, the rally ran out of steam midweek as the ongoing surge in oil prices started to blunt risk appetite and turn focus back to inflation concerns and central bank tightening expectations. With the US and Iran conflict showing no signs of stopping, crude prices have seen a more than 10% rally this week, now back up around the $90 mark from the $68 lows in early July. If the rally continues further this could start to see a deeper pull back in copper as Fed rate hike expectations lift once again.
Technical Views
Copper
The rally in copper has stalled for now into a test of the 6.5830 level resistance. However, with momentum studies bullish, focus remains on a fresh push higher while above the 6.2845 level with the 6.7190 record highs the next target for bulls.
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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.