Currency Corruption Weighs On Copper
Today’s Spotlight Market
Front month Copper futures fell to their lowest levels in over 3 months on currency and demand concerns.? The Federal Reserve indicated the asset purchase program will conclude on schedule next month, which helped bolster the US Dollar versus other major currencies. The Japanese Yen was noticeably weaker due to economic growth concerns in Japan. There is also news that the Chinese government uncovered more than $10 billion in fake currency transactions. Much of this activity took place in the port of Qingdao.? According to the State Administration of Foreign Exchange indicated that companies ?faked, forged and illegally reused? documents for exports and imports. Could this be just the tip of the iceberg? No one knows at this point. There have been rumblings about these types of sham transactions for some time, but these accusations were dismissed by many. ?
Fundamentals
The uncovering of the false transactions could have a negative impact on import activity, as the crackdown will likely continue. Investigators are now looking into whether or not Copper and other metals being held at facilities in the port were part of these sham transactions.? Besides potentially being purchased with fraudulent funds, metals may have been pledged more than once to obtain loans.? As a result, banks may attempt to limit their potential exposure by refusing to make loans secured by Copper and other metals.? This crackdown is just one of a series of measures the Chinese government has taken recently to reduce fraudulent activity and corruption.? Long-term, these reforms will lead to more transparency and will reassure investors to continue investing in China.? In the near-term, however, reforms and economic tightening could make for rocky growth.? The US continues to have a rosier economic outlook than Europe, Japan and China, which could contribute to further gains in the greenback.? A stronger US Dollar could mean lower investment demand for commodities, including Copper.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the December contract breaking near-term support near the 3.0750 level.? Prices may now test the $3 mark in the near-term, which may be viewed as a key psychological level.? Technical support comes in just below $3 at 2.9750.? The market could regain some near-term momentum by reclaiming the 3.0750 level.? The RSI indicator is not at oversold levels, which could be seen as technically supportive in the near-term.
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