Copper Rally Resumes
Copper prices are turning higher today with the metal once again keeping pressure on the 3.9410 resistance level, suggesting risks of a breakout higher. The metal has advanced well off the October lows and, despite some correction lower at the start of the month, is now back up near Q3 highs. The driver behind the fresh uptick in bullish sentiment is the weakness we’re currently seeing in USD. On the back of the Fed signalling that it expected to cut rates three times next year, USD has pulled back sharply, funding a wave of demand for commodities including copper.
Central Bank Easing Expectations Supporting Copper
With central banks around the world now expected to move into monetary easing next year, reversing much of the post-pandemic tightening we’ve seen, commodities prices look set to benefit. Expectations of looser financial conditions should keep demand supported near-term offsetting geopolitical concerns and concerns over the health of the Chinese economy.
USD in Focus
While the narrative around expected central bank easing holds, expect further upside in copper near-term as risk assets continue to appreciate. With this in mind, incoming US data will be particularly key for gauging USD direction with any fresh downside likely to see traders bringing their Fed rate cut expectations forward.
The rally in copper has seen the market moving back above the bear trend line from YTD highs. Price is now holding just below the 3.9410 level and with momentum studies bullish, the focus is on an eventual break higher and a push up towards the 4.1185 level next. To the downside, 3.6745 remains the key support to note.