COPPER TODAY – Further upside capped by DTL off September 2015 high
With China away on a week-long national holiday, the base metals seem to have stalled and lack the impetus to break higher. As well, better-than-expected economic data out of the US has firmed the dollar, further raising the probability of a rate rise as early as November. An in crease could affect access to cheap finance and raise the cost of financing. Against such as backdrop, base metals might continue to consolidate lower.
Copper’s net long fund position is seeing big shift while money managers grow more confident about being bullish. Fresh buying has outpaced selling at 7,953 lots and 4,628 lots respectively for a rise in the NLFP to 41,995 lots. At the current rate, it has the previous high at 48,190 lots in it sights.
A well-supplied market and readily available secondary material are forcing physical premiums lower in the US. “We have cathode to sell but no one is paying even 5.5 cents,” one US market participant said. In Asia, premiums are unchanged.
Sporadic large inflows to Asian LME-listed warehouses have kept total LME stocks elevated at 359,725 tonnes. Available stocks edged slightly higher to 283,425 tonnes. With no dominant warrant holder, the contango in the c/3s has widened to $21.25 – lending capacity is far more relaxed.
Copper is consolidating again after finding fresh supply from the DTL off the September 2015 high. For bulls to advance, this resistance needs to be broken. Otherwise, there is a risk of a retest of the January low UTL.
|All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.|
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