Copper: Alternative Demand to Offset China Weakness?
After surging higher last week, Copper prices fell sharply lower this week as the US Federal Reserve raised rates for the second time this year. Citing strong economic growth and labour market conditions, the Fed raised rates a further 0.25% to take the federal funds rate to 1% – 1.25%, its highest level since 2008. The red metal was shunted sharply lower in reaction to the news as an increase in Dollar strength lowers the price of Copper.
Ahead of the release Copper has been enjoying some resurgent strength linked to reports forecasting a significant increase in demand over the year linked to alternative uses for the metal. Electric Vehicles, which use copper in their batteries, are expected to see a surge in demand over the year – fuelling a similar increase in copper demand.
Copper is also being used in industries such as fish farming, with salmon cages now being lined with copper, while some firms are also looking into copper’s antibacterial qualities for use in hospitals and special socks. This new area of demand is expected to compensate for traditional Chinese industrial demand which many feel will now start to taper off.
The sell-off in copper is likely frustrating for many traders as it keeps the current range intact. Price has been stuck in the heavily congested zone between 2.75 and 2.45 since December of last year, and this latest pullback means the range is likely to continue for now. The key levels in copper remain untouched for now: to the topside, key resistance is the long-term bearish trend line from 2011 highs and the 2015, which sit roughly on-top of each other. To the downside, first key support is the December 2016 low with deeper support at the mid-2016 highs.
Read more: https://www.orbex.com/blog/2017/06/weekly-commodities-wrap-fed-rate-hike-sends-metals-crashing/