Better China Data Boosts Copper

Copper prices have broken out to their highest levels since January 2023 this week. There are a few factors at play here but the two main bullish drivers to focus on are the improvement in Chinese factory data and the weakness in USD. On the China front, a second consecutive monthly uptick in the factory sector PMI was seen on Monday. With the sector now back into growth territory, the demand outlook for copper has improved considerably. Traders are hopeful of a new upward trend in factory activity which should keep copper prices further supported near-term.

Fed Easing Expectations

In terms of USD weakness, we’ve seen a big shift in USD this week which has further amplified the gains in copper. Fed’s Mester pointed to a likely June rate cut in comments made earlier in the week, which were then seemingly endorsed by a weaker-than-forecast ISM Services reading. Powell’s comments midweek seemed to echo Mester’s, urging the need for further evidence while signalling that the Fed was almost there with inflation.

US Jobs Due

Looking ahead, tomorrow’s US jobs data holds the potential to drive further volatility for copper. If we see USD selling intensifying in response to weak data, this should give copper plenty of fuel to push higher. If USD rebounds on any data strength, however, this should see copper correcting near-term.

Technical Views

Copper

The rally in copper prices has seen the market breaking out above the 4.1585 level with price now fast approaching a test of the 4.2975 level next. With momentum studies bullish, the focus is on a further push higher here. To the downside, any move sub-4.1585 will turn focus back to support at 4.0150 next.