China Economic Fears

Copper prices are under heavy selling pressure as we cross through the middle of the week as fears over the Chinese economy and hawkish Fed expectations combine to weigh on sentiment.  The latest round of data out of China showed that profits from industrial firms there slowed sharply in the first five months of the year. This comes on the back of recent weakness in Chinese export data as well as industrial output readings. While recent rate cuts from regional banks and the PBoC have added some support, action as yet have not been enough to fuel a shift towards optimism from trader’s perspectives.

Hawkish Fed Expectations

Added to this, a slew of better-than-forecast US data this week has strengthened the market view that the Fed will likely push ahead with further tightening at the next meeting. Rising home sales and stronger consumer confidence suggest the Fed has plenty of room to tighten further. Focus now shifts to the next round of labour market data due next week. If employment conditions are still strong, this should see yields rising on expectations of further tightening, dragging copper prices lower near-term. Today, focus will be on Fed’s Powell who is widely expected to reaffirm recent Fed hawkishness.

Technical Views

Copper

The failure at the 3.9410 level has seen the market turning heavily lower. Price is now once again testing the bull channel lows just ahead of support at the 3.6745 level. This is a key pivot area for the market which, if broken, opens the way for a move down to the 3.3445 level next.