FOMC on Watch
Copper prices are turning sharply lower ahead of the FOMC today with the futures market down around 2% so far on the day. The sell of is likely profit taking ahead of the event given the bullish USD risks seen today. Heavy dovish expectations into the event leave USD vulnerable to a squeeze higher if the Fed fails to fully satisfy expectations. As such, risk assets such as copper are vulnerable to a downside squeeze, particularly given the almost 9% recovery rally we’ve seen in recent weeks.
Supply Concerns
Alongside positioning adjustment ahead of the FOMC, copper prices are also suffering from elevated supply expectations. Chile, the largest global producer of the red metal, this week published expectations that national output will is expected to rise this year and next, projecting a new record of 6million tonnes, annually, by 2027. This outlook echoes recent industry data which revealed strong increases in output over July.
Bullish Outlook
Looking ahead, there is room for the rally in copper to resume if the Fed delivers on dovish expectations today. If the Fed cuts rates as expected and signals that further easing is likely, especially if we see the dot plot forecasts lifted in line with market forecasts (3 cuts expected), this should lead to fresh selling in USD, creating room for renewed upside in copper.
Technical Views
Copper
Copper price are turning lower here, retesting the 4.5785 level support. With momentum studies dipping, risks of a downside break are seen with 4.30 the lower level to watch if we do push deeper. While this support holds, however, focus is on a fresh test of the 4.8010 level next and a continuation higher.
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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.