Can Copper Recover From Here?
Copper Sell-Off Pauses
Copper prices continue to stabilise ahead of the weekend following heavy selling earlier in the week as a breakout move in USD hit commodities sentiment. Copper futures were down around 7.5% at the lowest on Wednesday but have not made any fresh push lower since as questions have started to emerge over the US inflation outlook in light of yesterday’s unchanged core PCE data and heavily lower oil prices.
Hawkish Fed Shift
Earlier in the week, copper came under heavy selling pressure as USD broke out to fresh YTD highs. Much of this move was driven by traders still digesting the June FOMC last week which saw the Fed shifting firmly to the hawkish side. Nine out of eighteen policymakers forecasted at least one hike this year with five members forecasting at least two hike. This was up from zero members forecasting a 2026 hike at the last update in March.
US Inflation Outlook in Question
However, on the back of an aggressive jump in traders Fed rate hike expectations (pricing jumped to around 85% from sub-60% pre-FOMC), traders are now questioning if this move is fully warranted. Oil prices have dropped around 25% this month and look likely to continue lower as distribution through the Strait of Hormuz returns. As such, inflation should start to cool too, diluting the need for Fed rate hikes later this year. If this view gains traction and USD starts to fall, copper prices could be due a firm rebound higher.
Technical Views
Copper
The sell off in copper has seen price breaking down below the 6.1090 level, close to testing 5.8550 and the bull channel lows. Bulls need to defend this region to keep the focus on a fresh push higher and a continuation of the bull channel. While below 6.1090, however, risks of a break lower are seen with 5.6260 the next support level to note.
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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.