Copper Breaks Lows

Often referred to as ‘Dr Copper’ because of its use in gauging the health of the global economy, the latest decline in copper prices is a worrying symbol. Copper futures have been declining steadily since the YTD highs in January, now down around 16% from that peak. Selling has been amplified recently amidst the fresh uptick in USD which comes as a function of increased safe-haven demand linked to ongoing uncertainty around the US debt ceiling talks.  Hawkish Fed sentiment has also fed into this recent USD strength, which is again exerting downward pressure on copper prices.

Factory Sector PMI Weakness

Today, weakness in the latest UK and Eurozone manufacturing PMIs is also putting pressure on copper prices. These readings have reflected a growing trend of fresh weakness in the factory sector for both economies, leading to a weaker demand outlook for copper. Additionally, weaker industrial data out of China recently has also added to concerns over the demand outlook for copper. Focus will now shift to the latest US manufacturing data due later today. If weakness is also seen in US data, we can expect the current decline to continue lower near-term. On the other hand, any solid upside beat might halt the decline, offsetting recessionary concerns.

Technical Views

HG – Copper Futures

The sell off in copper prices has seen the market travelling from above the bull channel down to a test of the channel lows. Price is currently probing beneath the channel and beneath the 3.6745 level support. With momentum studies turned bearish, while below here the focus is on a further push down towards the 3.3445 level support.