Copper Drops Sharply As Sentiment Shifts
Copper Sinking on Friday
Copper prices are falling sharply on Friday with the futures market gapping lower today and now down around 2% from yesterday’s close. The move comes amidst a fresh uptick in USD as focus reverts back to the re-escalation of the US/Iran war and the renewed inflation implications linked to the conflict. With oil prices surging higher again, Fed tightening expectations have come back into focus and we’re seeing risk assets recoiling ahead of the weekend. Neither the US or Iran are showing any signs of stepping back from the recent increase in hostilities and with risks of further escalation seen, oil and USD are both seen vulnerable to renewed upside, leaving copper at risk of a deeper push.
Iran War & US Inflation Expectations
The move lower will be frustrating for bulls who had enjoyed a breakout move in copper earlier in the week as attention settled on supply issues. Falling output in Chile, the world’s largest producer of copper, saw futures hitting their highest level since mid-June. The sharp drop in June US CPI also helped bolster copper prices as USD plunged on tempered Fed tightening expectations. However, with sentiment now shifting back to inflation concerns once again and the prospect of oil pushing higher if the conflict continues, copper price look set to continue lower near-term.
Technical Views
Copper
The rally in copper has stalled for now on the break above 6.2845 with price now reversing heavily back under the level and retesting the broken bear channel resistance line. Below here, 6.1090 is the key support to watch and medium-term pivot with bulls needing to defend that level or risk a much deeper drop.
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