Copper Collapses Post-FOMC
Copper Plunges
Copper prices have come under heavy selling pressure today with the futures market gapping lower, extending losses from yesterday. The sell-off comes amidst a host of bearish factors with LME copper inventories seen rising to their highest level since 2019 this month as a result of weaker physical demand. Additionally, reduced demand in China and lower shipment numbers to the US, as a result of tariffs, is also weighing on copper prices here. Finally, USD strength amidst the ongoing war in Iran and heightened energy prices, is feeding into lower demand expectations, further exacerbated by global economic concerns as a result of soaring energy prices.
Hawkish Fed Expectations
The March FOMC yesterday has created further headwinds for commodities prices near-term. While the Fed held rates steady and retained a projected rate cut this year, policymakers now see just one cut down from two. Furthermore, with Powell warning of heavy uncertainty in the outlook and both inflation and growth forecasts revised higher, traders are keenly aware of hawkish risks should the Iran war drag on. As such, USD upside risks remain in focus with copper prices vulnerable to continued selling if hawkish Fed expectations rise in coming weeks/months.
Technical Views
Copper
The sell off in copper has seen price breaking down below the bull channel and the5.6260 level support. Price is now probing deeper support at 5.4415 and with momentum studies bearish, risks are skewed towards a test of 5.3530 next. Only a break back above 5.6260 will alleviate near-term bearish risks.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% and 73% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.