Copper Lower After Chinese Factory Activity Loses Steam

  • Copper
    (${instrument.percentChange}%)

Copper Analysis

After a strong fourth quarter and a powerful 2023 start helped by China's ditch of the strict zero-Covid policies, Copper dropped in February on expectations for a more aggressive Fed. It now heads to the conclusion of a mixed month as recession fears creeped in due to the banking turmoil, but this also forced the US Fed into a more conservative stance [1]. The Chinese central bank meanwhile, cut the reserve requirement ratio for large banks, to "effectively upgrade and appropriately expand the economic output". [2]

China's reopening has been cheered by markets and today the World Bank upgraded its 2023 GDP forecast to 5.1% from 4.3% in the previous forecast and compared to 3% actual growth last year [3]. The positive economic impact has already been evident in various economic indicators, as factory activity expanded for the first time in month in January and picked up speed in February. Today's data however showed a slowdown in March, since Manufacturing PMI stayed in expansionary levels (above 50), but the 51.9 print was lower than the month prior (52.6).

Copper is cautious today given the softer PMI in a subdued week and remains on a correction mode after January's peak. As such, there is risk of further pressure, but fears around the financial system have eased (at least for now) and a strong catalyst will be required for the 2023 lows to be challenged (3.706).

Despite the lackluster performance over the past several week, China's comeback and prospects of a tame Fed are tailwinds for the commodity. Above the EMA200 (black line) bias in on the upside, while the daily chart shows the recent formation of a Golden Cross (EMA50>EMA200), which is often a precursor to sustained strength. This gives Copper the chance to push for fresh 2023 highs (4.356) and bring 4.579 in the spotlight, although fresh impetus will be required for such moves. The trajectory of the commodity could be affected by today's US PCE Inflation update.

Trade the News: View our Economic Calendar

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 31 Mar 2023 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20230322.htm

2

Retrieved 31 Mar 2023 http://www.pbc.gov.cn/en/3688110/3688172/4756445/4821979/index.html

3

Retrieved 19 Apr 2024 https://openknowledge.worldbank.org/server/api/core/bitstreams/2de8eeee-c254-4df4-904d-33cd888b6808/content

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}
Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.