Copper Lower on Monday

Copper prices are under pressure at the start of the week with futures currently down around 1.75% from last week’s highs. The move is likely partly due to position squaring ahead of a slew of key US economic data this week. Durable goods, GDP and core PCE are all on deck this week. On the back of last week’s FOMC minutes, traders are fearful of a fresh move higher in USD this week should data come in on the strong side. The minutes last week showed policy-makers agreeing that they needed to be cautious in actioning rate cuts, needing to see further signs that inflation is moving sustainably back to target. Core PCE data in particular will be closely watched this week given its importance for the Fed in calculating inflation.

Chinese Economic Concerns

Aside from the Fed, concerns over the health of the Chinese economy are also exerting downward pressure. The latest data showed rising inventories in China, highlighting the weaker demand environment currently. Recent efforts by the Chinese government to help bolster the economy have so far failed to translate into sustained upside, though stock price have gathered upside momentum.

China Manufacturing PMI Due

Looking ahead this week, traders will be watching the latest set of Chinese factory readings due on Friday. The manufacturing PMI is forecast to have ticked further lower last month. If confirmed this should keep copper prices pressured near-term, particularly if we see a fresh uptick in the US Dollar this week in response to any data strength.

Technical Views

Copper

The rally in copper off the 3.7370 support has stalled for now ahead of a test of the 3.9410 level. With momentum studies weakening, a fresh test of support looks likely as the current range persists for now. Should we see any breakdown below 3.7370 occur, 3.5475 will be the next target for bears. 

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