Copper Prices Signal Weakening Global Outlook
Copper prices remain under heavy selling pressure this week as demand concerns continue to weigh on sentiment. The futures market is currently testing support at the 3.9350 level, having fallen around 16% from the July highs and now down 25% from the YTD highs. The turmoil in global markets over the last fortnight has amplified negative sentiment with investors increasingly concerned over the health of the two leading global economies.
Weak China Backdrop
Data out of China has been considerably weaker over recent months leading to fresh stimulus action from the PBoC. Measures have yet to bolster confidence and with industrial readings continuing to soften, the demand outlook has been scaled back accordingly. Trouble in the property sector has seen lower construction activity leading to a build up of copper inventories which is further pressuring prices.
US Economic Fears
Over the last fortnight, US economic fears have also moved into the spotlight. Alongside a trend of weakening jobs growth, a slew of US readings have undershot expectations recently with industrial data weakening markedly. In line with recent economic data, many big names are now citing growing recession risks in the US, further dampening the demand outlook for copper. Near-term, this narrative looks likely to keep copper pressured. However, we should start to see some recovery post-summer with the Fed now expected to pursue a more aggressive easing path through Q3/Q4 which should help boost demand for metals.
Technical Views
Copper
The sell-off in copper has seen the market falling heavily below the 4.3000 level. Price is now testing support at the 3.9350 level and with momentum studies bearish, risks of a further drop towards 3.6720 are seen. Outlook remains bearish while prices holds below 4.3000
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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.