Copper, Commodities, Inflation, US Dollar, Federal Reserve – Talking Points
- Copper plunges through 200-day moving average on continued USD strength
- Metals remain under pressure as Fed rate hike expectations get pulled forward
- Fears continue to linger over global growth, Chinese property sector
Copper prices retreated again on Thursday as continued US Dollar strength weighed on metals prices. 16-month highs for the US Dollar saw front month COMEX-listed copper futures decline by more than 3%, falling for the third consecutive day. Copper, which is a key material for construction and electricity, has seen price fall sharply as global economic momentum slowed. A stronger US Dollar makes metals priced in USD more expensive for holders of other currencies, therefore harming demand.
Price also continues to come under pressure from China’s property sector, which continues to show signs of severe stress. Despite Evergrande staving off potential default last week, other developers remain under severe financial strain. Continued slowdown in China’s construction sector would strengthen headwinds for the metal, with the aforementioned sector being copper’s largest end-user.
Copper Futures Daily Chart
Chart created with TradingView
Recent surges in US inflation have heaped pressure on industrial metals as market participants move to price in a more hawkish Fed policy response. From a chart perspective, front-month copper futures are at a key junction. Having plunged through the 200-day moving average on Thursday, price found support at the 0.5 Fibonacci level at $4.1915. Should this level hold, market participants may look for a retest of $4.2800, which has been a key pivot point over the last few months. Further price depreciation could see a test of the key $4.0000 psychological level.
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— Written by Brendan Fagan, Intern
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