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FOMC On Watch
Copper prices are on watch today heading into the December FOMC meeting. The market has suffered six consecutive days of decline but is trading tentatively in the green for now ahead of the meeting. The Fed is widely expected to cut rates by a further .25% today, while signalling a lower projected pace of tightening next year, given sticky inflation and resilient labour market conditions. The reaction to this message, if delivered, should see USD trading higher, putting downward pressure on copper prices and the broader commodities complex.
Weak China Demand
Alongside less-dovish Fed expectations, copper prices have also been weighed upon by weaker activity in China. Reduced demand and failure by the Chinese authorities to stimulate the economy have seen copper prices falling heavily lower this year. A recent shift in tone from the Chinese government has so far failed to bolster sentiment. Looking ahead, copper prices look vulnerable to further downside near-term with any resurgent strength in USD around the FOMC tonight likely to depress prices further.
Trump Impact
There are bigger headwinds ahead for copper also. Trump returning to office next month presents a key risk to commodities with the incoming president warning of a fresh trade war against China. Given the weak backdrop, fresh tariffs and reduced trade as a result are likely to see copper prices sharply lower early next year.
Technical Views
Copper
The recent rally in copper has stalled for now into the 4.30 level with price since turning lower. If bulls can get back above there, focus will turn to 4.5785 next. To the downside, 3.9350 remains the key support to note with any break of the level turning focus to 3.6720 next.
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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.