Copper Pressured as China Grapples with Deflation

  • Copper
    (${instrument.percentChange}%)

Copper Analysis

China had moved away from the stringent containment measures of the Covid-19 pandemic, which quickly boosted economic activity. The recovery is sputtering though and today's data were the latest in a series of poor economic releases over recent month, aggravating fears over the rebound.

Consumers continued to tighten their purses in June, as CPI inflation came in at 0.0% y/y and the lowest in around two and a half years. The situation was more grim on the producer side, with deflation deepening by 5.4% y/y, in the the steepest decline since December 2015.

The weakening consumer demand in one of the world's top users of Copper sent prices lower. The commodity is now exposed to 3.680, although strong catalyst would be needed for the 2023 lows (3.543) to be endangered.

On the other hand, China's authorities are trying to prop the economy and provide liquidity to the financial system. The central bank cut a series of rates last month, even though these measures underwhelmed markets. More to it, the State Council recently vowed to support the recovery [1], while Premier Li Qang on Friday called for targeted and coordinated policy measures for this purpose. [2]

Meanwhile, Ms Yellen's visit to Beijing may help cool fears around the strained Sino-Western relations. The Treasury secretary spoke "direct, substantive, and productive" talks, stressing the United States is "not seeking to decouple" from China. [3]

Copper stays in the daily Ichimoku Cloud and may find the opportunity to press for the upper border (at around 3.870), but the upside is unfriendly and a broader rebound towards 4.000 looks like a toll order under current conditions.

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Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 10 Jul 2023 https://www.gov.cn/yaowen/liebiao/202306/content_6886887.htm

2

Retrieved 10 Jul 2023 https://english.www.gov.cn/news/202307/07/content_WS64a747f7c6d0868f4e8dd8f6.html

3

Retrieved 23 Jun 2024 https://home.treasury.gov/news/press-releases/jy1603

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