Copper Holding Near Highs

Copper prices remain relatively stagnant midweek as traders await a fresh directional catalyst. A better tone to risk markets generally has prevent the recent correction lower from developing further but fresh upside is yet to materialise. Last week’s softer-than-forecast US jobs numbers mean traders have all but priced out a rate hike from the Fed this month and are instead looking to December as the next likely candidate, currently priced around 70%. However, with oil prices in decline, inflation expectations are in focus once again and that pricing might start to slide lower too if energy prices continue to weaken near-term. If this can spill over into a weaker US Dollar, that should provide enough fuel for copper to make a fresh upside push.

Record-Low Supply Levels

Alongside softer Fed tightening expectations and lower energy prices, copper prices continue to be underpinned by ongoing supply issues. The latest data shows that production in Chile (global output leader) last month fell to its lowest levels since 2011. Adverse weather episodes, industrial strike action and site maintenance issues have combined to weigh heavily on production levels this year. While this backdrop remains, copper prices look vulnerable to continued upside near-term.

Technical Views

Copper

The red metal continues to trade around the midpoint of the bull channel which has framed the market from last year’s lows, currently hugging the underside of the bull trend line from YTD lows. While above 6.3750, focus is on a continuation higher with the record highs around 6.8615 the key hurdle for bulls near-term.