Dr. Copper In Need Of Some Medicine?
Today’s Spotlight Market
Copper futures have fallen to multi-year lows amid economic uncertainty and the idea that the Federal Reserve will tighten by mid-year.? The Fed changed the language it used for the labor market. The central bank is usually very careful when it comes to wording any public communications, so traders took notice when the Fed used the word “strong” instead of “solid” in its assessment of the labor market. Some traders viewed this as a sign that interest rates will tighten this year, most likely by mid-year.?? ?
Fundamentals
Copper bulls have had very little to cheer about, as inventory levels continue to climb. The LME has seen 13 straight inventory builds, as there is not enough demand to stimulate load-outs.? Chinese buyers did purchase 200,000 tons of the industrial metal for 2015, giving bulls a ray of hope.? However, overall demand could remain lackluster for the red metal.? With the Federal Reserve tightening interest rates, there could be very tame demand for new residential construction.? In China, profits by industrial firms increased by 3.3% in 2014.? This is the lowest industrial profits have been since data began being compiled in 2000.? Furthermore, profits by industrial companies contracted in the month of December, marking the third consecutive monthly decline.? This is significant, as China is the world?s largest consumer of base metals.? The Fed leaning toward tightening by mid-year could further propel the US Dollar, which could keep demand soft.? It is interesting to note the very large non-commercial short position in Copper, which may be seen as potentially bullish for Copper in the near-term.? In all, the spec net-short position is 49,893 contracts.? Funds account for 36,761 contracts of that short position, which suggests profit- taking and short-covering could potentially lift prices.? Fundamentals remain firmly in favor of the bulls, but it may be prudent for shorts to monitor changes in the Commitment of Traders report.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the March Copper contract continuing to plummet, reaching the lowest levels since July 2009.? There is very little chart support in this area. The market could find some support at the 2/5/2007 relative low at 2.4165.? The RSI is currently showing oversold levels, which could be supportive in the near-term.
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