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Copper Sell Off Deepens

Copper prices remain heavily sold this week with copper futures extending their recent rout, now down almost 13% from the YTD highs. The move comes on the back of weaker manufacturing data out of China and the US in the last fortnight. The data out of China is particularly concerning, given that it accounts for more than half of global copper consumption.
 

Weaker China Demand

The latest data has shown a drop off in demand in China recently, coinciding with last week’s weaker manufacturing PMI. With US factory data this week turning lower also, copper prices have seen increasing selling pressure with bulls covering recently held long positions, adding to the sell-off.
 

US Data in Focus

Looking ahead this week, traders will be watching movements in USD which could offer some support if we see any meaningful move lower in the Dollar. Incoming labour market data hold the potential to create plenty of volatility as traders battle to get a read on whether the Fed is likely to cut rates in September. On the other hand, if we see any surprise upside (particularly in Friday’s headline NFP set), this could fuel a recovery rally in USD weighing further on Copper near-term.  
 

Technical Views

Copper

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The reversal lower in copper from the bull channel highs has seen the market breaking down heavily through support. Price is now probing below the 4.5785 level, testing the bull channel lows. With momentum studies bearish, a break here opens the way for a test of 4.2975 next.

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