Copper Rally Pauses for Now

Copper prices are beginning the week in a quieter fashion after the solid gains we saw last week. The market surged higher by more than 4% as weakness in the US Dollar helped lift demand. Prior to last week’s rally, copper prices had been under heavy pressure as an uptick in hawkish Fed expectations saw USD trading higher, pressuring commodities across the board. Indeed, hotter-than-forecast US CPI at the start of last week fed further into this narrative. However, a sharp drop in US retail sales reported on Thursday saw USD longs quickly unwinding. With traders getting the first sense of weakness in the US economy, H1 rate cuts still look to be viable.

US Data & China News in Focus

Looking ahead this week, copper traders will be focusing on a slew of manufacturing PMI data out of the US, UK and eurozone. Additionally, this week’s FOMC minutes will be carefully scrutinised as traders continue to fight to establish how likely a rate cut is in the coming months. If data and Fed comments over the week are seen as more dovish, this should help keep copper prices supported. Finally, the return of Chinese markets this week following the Lunar New Year holiday will also be key for copper traders. With expectations of fresh China stimulus, any further news pertaining to this should help lift copper prices further this week.

Technical Views

Copper

The sell off in copper has stalled for now into a retest of the broken bear trend line. Price has since rebounded sharply higher, now trading back above the 3.7370 level. 3.9410 sits above as the next bull target to note with a break there seen as firmly bullish, paving the way for a breakout higher. 

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