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Copper Breaking Higher

Just a few weeks ago, copper prices were turning lower from a key resistance level and the market looked like it was heading for a fresh test of the YTD lows. Since then, copper prices have undergone a solid rebound and are now trading almost 7% higher, currently around fresh 2-month highs. The main driver behind the move has been the downturn in USD this month. The greenback has come under heavy selling pressure in line with the market adjusting its Fed rate-path expectations.
 

Fed to Stay on Hold

The market now judges that the Fed will likely stay on hold over the coming months before actioning initial rate cuts early next year. A softer-than-forecast set of US employment data at the start of the month was the first catalyst for the current USD unwinding we’re seeing. Later in the month, selling was deepened in response to October US CPI data which revealed a further, larger-than-forecast drop in inflation.  
 

Copper Shrugs Off China Economic Concerns

With Fed tightening now firmly priced out, DXY has been heavily sold, allowing room for commodities prices to recover. Indeed, the rally in copper comes despite fresh concerns around the health of the Chinese economy, linked to recent data weakness. As such, the focus is very much on USD currently and while the selling continues, copper has room to move higher near-term.
 

Technical Views

Copper

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The rally in copper has seen the market breaking back above the 3.6745 level and back above the broken bull trend line. Price is now testing the bearish trend line from YTD highs. A break here will open the way for a further move up towards the 3.9410 level next, in line with bullish momentum studies readings. 

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