Copper Pressured as Markets Digest Chinese Data & the US Debt Ceiling Saga
Copper Analysis
Copper prices are having a mixed and volatile week, as markets contemplate China's recovery, the debt ceiling negotiations in the US and the health of its banking sector, Fed monetary policy outlook and other factors.
The commodity dropped on Tuesday after the latest indicators from China, which is one of the its top consumers, sparked concerns over the recovery of the country's economy. Retail Sales and Industrial Production grew by 18.4% and 5.6% y/y in April respectively, which are strong prints, but significantly lower than what markets wanted.
A day later sentiment improved and carried Copper higher, as optimism prevailed around the US debt ceiling. US President Biden spoke that there is no alternative but to reach an agreement as every leader in the discussions "understands the consequences if we fail to pay our bills" [1]. Speaker of the House McCarthy said on CNBC that "I think at the end of the day we do not have a debt default". [2]
Adding to the positive sentiment, were some much needed good news from the embattled regional banking sector. Western Alliance Bancorp disclosed deposit growth this quarter, which send its stock (WAL.us) and the sectoral SPDR ETF (KRE.us) higher yesterday. [3]
Copper however faces difficulties again today, as there is still no resolution to the debt-ceiling drama ahead of the estimated June 1 deadline, while markets have moderated their aggressive pricing for rate cuts by the Fed this year.
The technical outlook has not changed much form our last analysis, since this week's fresh 2023 lows, increases the risk for a move below the ascending trendline from last year's lows (3.600-10), although 3.300 looks distant.
On the other hand, the recent optimism may give Copper the chance to push for the EMA200 (3.890). Daily closes above it would pause the downside bias, but we are cautious any ascending prospects, as the upside appears to be unfriendly.
Nikos Tzabouras
Senior Market Specialist
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.
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