Copper Pushing Back up To Highs As USD Sinks
Copper Rallying
Copper prices are pushing higher ahead of the weekend with the futures market benefiting from the current bout of USD weakness we’re seeing. The greenback has turned heavily lower on the back of the July FOMC midweek which saw the Fed holding rates steady with Fed chairman Warsh giving very little in the way of forward guidance. USD bulls were left somewhat empty handed at the meeting, with the Dollar since turning lower.
Supply Issues
Should this current dynamic continue, commodities prices should find stronger support. This is particularly true given the wider backdrop of supply constraints and rising demand for copper. Sulphuric acid restrictions out of China have seen output levels in Chile plunging this year. At the same time, the level of demand from the renewable energy sector, alternative vehicles and now AI, continues to rise, creating deeper upwards pressure in the market. Looking ahead, if USD continues to weaken, copper prices look poised to breakout to fresh record highs in coming months.
Middle East
One area that could help drive accelerated gains in copper is the US/Iran war. If the two sides can agree a lasting peace deal and achieve an end to the conflict this would be firmly bullish for copper. A broad rally in risk assets, led by a drop in oil prices and a deeper weakening of the US Dollar should help catapult copper to fresh highs. On the other hand, if the conflict intensifies and oil prices start rising again, this should pull USD higher, weighing on copper near-term.
Technical Views
Copper
The rally in copper has taken price back up to the 6.5830 level where the rebound off the June lows was previously capped. If bulls can get back above this level, focus will be on the 6.7190 record highs. To the downside, 6.1090 remains the key support to watch for now.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% and 73% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
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.