Copper: Red Metal Suffers Sharp Decline On Better US Data
Copper prices fell sharply lower over the week despite comments from Donald Trump earlier in the week that the US Dollar was too strong. Fears were present in USD trading this week ahead of Trump’s inauguration on Friday, as investors worried that the President would pursue proposed protectionist policies which would damage economic growth.
Despite these fears, USD found support over the week on a raft of positive data. December industrial production recorded its biggest increase in two years while December CPI rose to 2.2% on the core reading and 2.1% on the headline figure. The data confirmed positive momentum in the US economy, boosting the Dollar and weighing on commodity prices. Positive CPI increase markets expectation of further Fed hawkishness which keeps the US Dollar supported.
FocusEconomics released the results of a survey this week where they polled 22 investment banks and commodity research institutions. 13 of those polled raised their previous forecasts for copper prices by year end. However, only a handful predicted forecast copper to average the final quarter of 2017 above the current price. Unicredit are the most bullish on copper, forecasting price to average $2.77 over 2017 whilst JP Morgan were the most bearish forecasting copper falling to $2.13 by the end of the year.
Looking ahead, traders await the release of Chinese GDP and industrial output data on Friday which will be a key input for Copper prices as China is the world’s largest copper consumer. Ultimately, copper has reached a key juncture now as the initial hopes aligned to President Trump’s proposed infrastructure expenditure program are meeting fears about the threat from potential protectionist policies.
For now, copper prices remain capped by the November high but still remain tilted toward the upside suggesting a continuation higher. The long term bearish trend line sits overhead as the next key resistance.
Iron Ore: Rally Continues Despite Record Chinese Stockpiles
Iron ore prices surged to fresh highs this week before pulling back slightly as the US Dollar regained ground following strong data. Despite reports that China’s stockpiles of iron ore are at record highs, with shipment levels continuing to grow, iron ore prices have continued to rally, catching some investors off guard. Given the fundamental environment, many analysts are blaming the rally purely on speculators.
Iron ore prices have once again traded back above the 80 level despite concerns around stockpiling levels in China. The current move continues the breakout from the large inverse head and shoulders bottom which was completed last year.
Aluminium: Rally Continues Despite Analyst Warnings
Aluminium prices soared to fresh highs this week, continuing the bullish trend that marked 2016. The moves come despite warnings from many analysts that prices are set to fall following significant deliveries to LME warehouses last week.
Aluminium prices are continuing to forge higher ground. Having broken out above the long-term bearish trend line that capped prices last year, Aluminium is now heading toward its next key flashpoint, the test of the bullish channel resistance line along with the 2015 April low.
Zinc: Rebounded Off Lows Over The Week
Despite remaining negative on the week, Zinc prices staged a solid rebound off initial lows. The metal was one of the strongest performings of the complex last year and are remaining firm so far this year despite sitting below last year’s highs.
The rebound in Zinc prices over the week has taken the metal back above the key 2737 level which was the 2010 high and a key price pivot over the last few months. Whilst above this level prices look poised for fresh upside with last year’s high the key, initial target.