Copper Losing Its Luster?
? ? Fundamentals
Copper futures continue to fall due to the government’s budget impasse and rising stockpiles of the metal. Many Copper traders were also expecting some sort of stimulus from the Chinese government but were left disappointed, despite better growth from the Asian giant.
LME stockpiles expanded for the 11th consecutive session to just less than 312,000 tons, which is the longest streak in almost 2 years. By no means is the Copper market as oversupplied as, say the Crude Oil market, but supplies going into the new year are much tighter than they were expected to be just several weeks ago.
Some traders are expecting something the Copper market has rarely seen in recent years — a surplus. The surplus is only expected to be 100,000-125,000 metric tons, which amounts to roughly half a percent of total output. With uncertain demand from China, a surplus could have a negative impact on prices.
??? Technical Notes
Turning to the chart, we see the March Copper contract pulling back sharply since testing resistance near the 3.75 level. The market moved higher for almost a month straight, so a pullback on overbought conditions was not unexpected, but the pace at which the market has dropped may have caught some traders off guard.
Yesterday’s close below the 20-day moving average may indicate that a near-term high is in place. On the downside, a close in the vicinity of 3.45 could be viewed as significant, as closes below that level could signal a downside breakout.
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