CNY Industrial Production Drops

Copper prices continue to move lower through early European trading on Monday. Overnight, weaker-than-forecast Chinese industrial figures have added to bearish sentiment in the metal. Industrial production was seen sliding to 5.6% last month, down from 6.7% prior and below the 6.2% reading the market was looking for. A recent downturn in Chinese factory data has been a key driver of the weakness we’ve seen in copper prices recently. Fears of a developing slowdown in demand in China, the largest global copper consumer, has seen the futures market shedding around 15% recently.

US Dollar Strength

Alongside the drop in Chinese industrial data, a stronger US Dollar has also created headwinds for copper bulls recently. Despite a fresh drop in CPI, the Fed was decidedly hawkish at last week’s FOMC meeting. The bank now forecasts just one rate cut this year, down from three projected earlier in the year in line with the upward revision to 2024/25 inflation forecasts.  Powell warned that inflation remains too high and cautioned that the Fed’s easing cycle will likely be delayed as a result. The US Dollar has remained well bid on the back of the meeting and looks likely to remain supported near-term, particularly given the recent rate cuts we’ve seen from the ECB and BOC.

Technical Views

Copper

The reversal lower in copper has seen the market breaking down below key structural support levels and now below the bull channel too. While below 4.5785 the focus is on a retest of the broken 2023 highs around 4.2975 in line with bearish momentum studies readings.  

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