Copper prices declined by -0.91% to settle at 814.8, driven by a stronger dollar, which approached levels close to 103.8, dampening hopes for a swift decrease in interest rates by the Federal Reserve. Despite China's central bank lowering benchmark lending rates to record lows, with the one- and five-year loan prime rates cut by 25 basis points to 3.1% and 3.6%, respectively, the pressure from the strong dollar outweighed the positive impact of China's economic stimulus. The People’s Bank of China also indicated the possibility of further measures, such as reducing banks' reserve requirements before the end of the year.
On the supply side, copper inventories in Shanghai warehouses rose by 7.6%, signaling an increase in supply. Meanwhile, Peru’s copper production saw a 10.7% rise in August, the highest monthly output this year, although year-to-date output remained below 2023 levels. The global copper market posted a surplus of 91,000 metric tons in July, according to the International Copper Study Group (ICSG), continuing from a surplus of 113,000 metric tons in June. Despite these factors, the outlook for copper remains buoyed by strong demand expectations from the clean energy transition, even as the global refined copper market remains in surplus for the first seven months of 2024.
Technically, copper is under fresh selling pressure, with a 1.36% increase in open interest to 6,335. Prices have found support at 808.1, and a break below this level could see a test of 801.2. Resistance is likely at 827, and a move above this level could push prices towards 839.
Trading Ideas:
# Copper trading range for the day is 801.2-839.
# Copper dropped as dollar index approached 103.8 close to high levels not seen since early August.
# China’s central bank reduced benchmark lending rates to record lows, boosting the economic outlook.
# Expectations of strong copper demand driven by the shift toward cleaner energy raised concerns about a shortfall.