Stronger USD Weighing on Copper

Copper prices remain under pressure into the middle of the week as a combination of a stronger US Dollar and weaker data out of China weigh on trader sentiment.  With the Fed pushing back against those calling for imminent US rate cuts, USD is seeing decent demand currently. Comments from Fed’s Waller yesterday have seen traders scaling back their March rate cut expectations. If this dynamic continues, we can expect USD to continue higher near-term, keeping copper prices weighed down. US retail sales later today will be the next key input to watch.

China Q4 GDP Undershoots Forecasts

On the China front, data overnight served as further cause for concern. Q4 GDP was seen rising less than forecast at 5.2% vs 5.3% expected, though still up from the prior quarter’s 4.9% reading. Retail sales, meanwhile, were seen falling to 7.4% from 10.1% prior, below the 7.9% the market was looking for. With the unemployment rate also creeping up to 5.1%, the data was broadly received as negative, putting fresh focus on the need for further stimulus. The PBOC held rates unchanged this week, a move which caught traders off-guard. While economic concerns continue to dog the outlook in China, demand expectations are likely to remain limited in copper, keeping the market under pressure near-term.

Technical Views

Copper

The reversal lower from the 3.9410 level has seen the market trading back down to retest the broken bear trend line. This area is holding for now. However, with momentum studies weakening, the 3.6745 level looks likely to be tested near-term. Below there, 3.5475 will be the next support to note.