Copper Plunges Following Trump/Xi Meeting
Copper Under Pressure
Following a breakout move higher earlier in the week copper prices have seen a violent reversal lower today. The futures market has collapsed around 3.5% so far on the day, now down almost 6% from the highs seen on Wednesday. The move lower comes amidst a strengthening in USD as hot inflation data and ongoing uncertainty around the Iran war see investors rushing back into USD long positions. Initial headlines from Trump and Xi’s meeting yesterday look to have underwhelmed traders with little focus on Iran.
China & Iran
There had been speculation that strong headlines around Iran could help cap the rally in USD, suggesting a greater chance of a deal coming soon via help from China. However, despite Trump signalling that both the US and China have a similar view on Iran, nothing concrete has emerged and China’s public position has not changed. Against this backdrop, and with no progress in peace talks, the stalemate continues between the US and Iran and energy prices should remain elevated accordingly, keeping USD turned higher.
US Inflation Jumps
Earlier this week, the latest US inflation data was seen coming in above forecasts at 3.8% vs 3.7% expected, a strong rise from the prior month’s 3.3% reading. Now back at 3-year highs, Fed rate hike expectations are rising with traders pricing in a roughly 365% chance of a hike by year end. With hawkish expectations set to rise further while inflation continues higher, USD looks poised for fresh upside near-term unless there is a shock breakthrough in US/Iran peace talks, which should keep copper from pushing higher again for now.
Technical Views
Copper
The rally in copper has quickly reversed back under the 6.5830 level. Price is now fast approaching a retest of the 6.2845 level support which bulls need to defend to prevent a deeper down towards 6.1090 next, in line with falling momentum studies readings.
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