Copper:  Rebound In USD Weighs

After an initial surge higher on Monday, Copper prices returned lower and consolidated over the week. Ahead of options declaration day on Tuesday Copper prices soared higher helped along by a weaker US Dollar.

Chinese data also came in strong during the week with Chinese exports and imports both seen rising over November reflecting a pickup in domestic and global demand. Chinese demand has been a big part of the picture for metals this year and whilst many analysts have continued to call for a reduction in demand, demand has remained firm and supported higher prices across the metals space. Chinese imports surged 6.7% over November in stark contrast to an expected fall of -1.9%.

Despite initial strength on the week prices ultimately fell back as the Dollar rebounded later in the week in response to the December ECB meeting. The ECB noted that they will extend their current QE program beyond the current March 2017 end date until at least December of next year, however, the bank also noted that they will scale back the size of their purchases from 80bn Euros per month to 60bln Euros per month.  The news saw the Dollar Index immediately strengthening as the Euro cratered lower, subsequently weighing on commodities prices.

Traders now look ahead to the December FOMC meeting next week. Whilst markets are widely expecting the Fed to raise rates, it is not yet clear whether the Fed will give a Dovish hike which could ultimately provide support for commodities. For now, markets remain cautious ahead of the meeting which is likely to be pivotal for the direction of both commodities and the US Dollar heading into next year.

 

 

The technical picture for the red metals points more to consolidation rather than exhausted bullish momentum. For now, prices have been capped again the post elections high though the price is continuing to hold in the upper end of the range and continues to test the high watermark following Trump’s election. The next key resistance will be a test of 2015 high and long term bearish trend line resistance around 2.944

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