Copper Held Up at Key Resistance

Copper prices continue to be held up at the 6.1090 level with the futures market turning lower today amidst a resurgence in uncertainty around the Iran war. News that the US has seized an Iranian ship in the Strait of Hormuz has seen Iran claim it will not take part in a schedule second round of peace talks later today in Pakistan. Markets are now on tenterhooks awaiting further news on the situation. With Trump threatening to ‘knock out every power plant’ in Iran if a deal is not done, there is heavy cross-market risk today. If Iran doesn’t join the talks and Trump ups his threats, risk assets should fall sharply as crude and USD surge higher once again. However, if Iran does join the talks this should help fuel a fresh wave of risk-on activity with copper set to make a fresh challenge of resistance in this scenario.

China Outlook Improving

Better data out of China recently has helped lift copper demand expectations. A surprise uptick in GDP along with reports of higher import figures, have contributed to a firmer bullish outlook for copper beyond near-term geopolitical tensions. If the US and Iran can get negotiations on a track and a deal looks forthcoming, bullishness in the broader macro back drop should provide enough support for a fresh breakout in copper particularly if we see USD selling off. Lower energy prices will also contribute to better global trade expectations, further feeding into the bullish copper outlook.

Technical Views

Copper

The rally in copper has stalled for now into the 6.1090 level resistance. Momentum studies are dropping here suggesting room for a further correction lower near-term. While above 5.8550 and the bull trend line, however, focus is on a continuation higher towards 6.2845 next. Below 5.8550, focus turns to deeper support at the 5.6260 level.