Copper Selling Pauses – For Now

The decline in copper futures looks to have paused for now with the market steadying around 4.40 per pound on Thursday. Investors are taking a moment to reconsider how China’s stimulus efforts might affect demand for base metals in the short term after the metal had been heavily sold from the recent 4.79 highs

China Stimulus

To boost capital markets, China’s central bank set up a swap facility worth 500 billion yuan for financial institutions, including securities firms and insurers, to help with stock purchases. Beijing had already rolled out a broad monetary stimulus package in response to some concerning economic data that raised doubts about hitting their 5% GDP growth target. However, the lack of new measures announced during an unexpected briefing from the economic planning agency this week made investors concerned about whether this support would actually boost demand for industrial metals like copper.

Fed Impact

Meanwhile, commodity markets faced some pressure as investors started to dial back their expectations for aggressive interest rate cuts from the Federal Reserve, especially after a strong jobs report in the U.S. Looking ahead today, focus will be on the latest US inflation data. If we see any surprise to the upside, this could revive selling copper as traders further scale back their easing bets. On the other hand, any downside surprise in today’s data will be welcomed by copper bulls, pulling USD lower.

Technical Views

Copper

The failure in copper ahead of the 4.84 level has seen the market reversing sharply lower. Price is now back under the 4.5785 level and close to testing support at 4.30. Bulls need to defend this level to prevent a deeper move to 3.9350 next.