Dr. Copper Hits Multi-Year Lows
Today’s Spotlight Market
Front-month Copper futures hit their lowest price since early June 2010, extending the industrial metal?s bear market.? Rising inventory levels, concerns over Chinese growth, and the idea that Greece could leave the Euro currency but remain in the European Union have all weighed on Copper prices.? Greece leaving the currency could have a devastating impact on the Euro.? Some observers surmise that a Greek exit could create an environment that ultimately results in the failure of the currency.? The speculation has resulted in a lower Euro and higher US Dollar to begin the year, which may threaten commodity prices.
Fundamentals
China?s lackluster growth has been a major concern among Copper bulls.? There has been an absence of Chinese buying by manufacturers, which has resulted in supply surpluses.? LME inventories are at their highest level since May, after climbing 0.8% to 178,425 tons.? In Shanghai, Copper inventories climbed for the fourth straight week to 111,915, which is the highest stockpile level since April.?? The ISM index in the US showed the slowest factory activity in 6 months, while the Chinese Purchasing Managers? Index fell to 18-month lows.?
One bright spot on the manufacturing front comes from Germany, where the Markit/BME Germany Manufacturing Purchasing Managers? Index rose to 51.2 in December, up from November?s 49.5 reading.? Not only has the index moved back into expansion territory, but manufacturing companies have hired additional workers to meet demand.? Whether this is a blip on the radar or the start of further expansion remains to be seen.?
German progress on the manufacturing front could also be undermined if Greece decides to leave the Euro currency unit or the EU altogether.? The US Dollar could continue to gain traction versus the Euro and other currencies.? The slump in Oil prices has negatively impacted the Canadian Dollar, while metal prices have hurt the Aussie Dollar.? Further gains in the greenback could prevent a rebound in Copper prices.
Technical Notes? -? View Today’s Chart
Turing to the continuous Copper chart, we see the March contract approaching 2.7660, the relative low from June 7, 2010.? If the March contract is unable to hold here, prices could test support near the 2.4200 level.? There is not a lot of chart support for Copper after prices broke the pivotal 3.000 level on the downside.? The lack of support may prevent a rebound in Copper, as fresh longs could become skittish at any sign of adversity.? The RSI indicator is currently at oversold levels, which may be seen as supportive for Copper near-term.
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