Copper Woes Continue
Today’s Spotlight Market
Copper futures are trading at their lowest level since mid-June amid a flurry of negative forces affecting the market.? Uncertainties over the state of the Chinese economy and the strength of the US Dollar have been especially negative for the Copper market. China has been pushing out a series of reforms to ease the downward pressure on the economy, but, at the same time, the government has been battling corruption and attempting to prevent bubble conditions.? As a result, July industrial output, investment and retail sales have regressed.? The US Dollar has strengthened by almost 4 and a half percent over the quarter, which has put downward pressure on commodity prices across the board.? Dollar-priced raw materials are more expensive, making them less attractive to investors.
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Fundamentals
Despite softer economic data, Chinese imports of Copper were largely unchanged in the month of August. This can be seen as supportive in light of the poor economic showing and metal financing probe. The Chinese government has been investigating loans made to base metal firms using metals such as Copper as collateral. The unchanged import figure is also surprising given the fact that many Copper processing mills came back online in August, adding to the domestic supply of the metal. Reports out of the Philippines indicate that the proposed export ban that was supporting prices may be years away. Government officials suggest that the law may not go into effect for 2 years and companies will likely have a 5 year grace period.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the December Copper contract coming down to test the 3.0750 level in early trading. Failure to hold 3.0750 suggests prices could come down to test the 3.0000 mark.? The succession of lower highs and lower lows beginning in July gives a bearish tilt to the market. The RSI indicator is nearing oversold levels, which could be viewed as possibly being supportive in the near-term.?
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