Copper Reverses

Copper prices continue to slide back today after the reversal from fresh highs printed on Tuesday. Copper futures spiked to record highs of 6.9285 before collapsing lower by almost 3%. The reversal comes amidst the ongoing rally in USD as focus reverts back to Fed tightening expectations. Market pricing for a hike next month is currently above the 50% level with a hike fully priced in by year end.

Hawkish Fed Expectations

USD has surged higher over the last week following the hawkish September FOMC meeting and with hawkish Fed commentary since then, rate hike expectations are building steadily. For copper, this fresh strength in USD certainly creates near-term headwinds but with broader market supply issues still a key supporting factor, the medium-term picture remains bullish. Better data out of China recently is also feeding into stronger demand expectations there and with output in Chile still well below typical levels, this dynamic should see health demand into any corrective moves in copper as we saw into the early September dip.

NFP Up Next

For now, volatility around current levels is expected but risks of a fresh breakout higher remain elevated. Looking ahead, next week’s US jobs data will be the next big challenge for the market with any fresh strength in that data likely to drive a fresh spike in USD, further weighing on copper near-term.

Technical Views

Copper

The rally in copper has stalled for now into the latest test of the 6.8615 level, creating a potential triple top with strong bearish divergence in momentum studies. The key pivot to watch is 6.5830 near-term and while price holds above here focus is on an eventual break higher. Below there, focus shifts back to 6.2845 as the next support to watch.