Copper futures prices rallied by more than 4% in the last week’s trade, and the metal is now approaching the year-to-date breakeven level. The question is: What is behind this rally?
Recent catalysts:
CPI and PPI came in well above estimates last week, sending interest rate yields higher. Industrial production numbers for the month of January contracted by -0.1% vs +0.1% expected. One would expect that both catalysts would have been negative for the industrial metal.
However, interesting developments in the manufacturing sector showed strength, especially the Philly Fed Manufacturing Index, which showed improving conditions for the first time since August 2023. PPI for the month of January was equally surprising, showing producer prices increased more than estimates.
Core PPI came in at +0.5% vs. +0.1% expected. A notable finding from the PPI report was that the final demand for construction, both government and private, was positive. This suggests a potential trough in construction, typically bullish for industrial metals such as copper.
Technicals:
Copper is currently trading between a wedge, and the recent break and close above the 50 and 200 Day EMAs suggest that we will likely retest the high end of the wedge. Breaking and closing above 3.95 would confirm an upside breakout.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Recent catalysts:
CPI and PPI came in well above estimates last week, sending interest rate yields higher. Industrial production numbers for the month of January contracted by -0.1% vs +0.1% expected. One would expect that both catalysts would have been negative for the industrial metal.
However, interesting developments in the manufacturing sector showed strength, especially the Philly Fed Manufacturing Index, which showed improving conditions for the first time since August 2023. PPI for the month of January was equally surprising, showing producer prices increased more than estimates.
Core PPI came in at +0.5% vs. +0.1% expected. A notable finding from the PPI report was that the final demand for construction, both government and private, was positive. This suggests a potential trough in construction, typically bullish for industrial metals such as copper.
Technicals:
Copper is currently trading between a wedge, and the recent break and close above the 50 and 200 Day EMAs suggest that we will likely retest the high end of the wedge. Breaking and closing above 3.95 would confirm an upside breakout.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.