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Keeping Up With Copper Can Be Taxing

Keeping Up With Copper Can Be Taxing

Copper appears to be in a holding period – along with all other markets – as we wait for the next move. Typically, that move is obvious – China releases new data, the U.S. raises interest rates, or the dollar makes a move. This time, the market is waiting to see what happens on a few fronts, including U.S. sanctions against Russia, the continuing conflict in Syria and tariffs between China possibly escalating into a full-fledged trade war.

Despite all those factors weighing on the markets, it still needs to be “business as usual” (or as usual as possible). Copper prices are down almost 6% this year after hitting a four year high to close out 2017. Despite the drop, the price has remained above the $3.00 per pound mark all but a few days this year.

“Copper has held up quite well considering the dollar has slowed its downward trajectory, the prospects of tariffs and a potential trade war with China are distorting all commodities prices, and inventories exploded to the highest level in four years,” states Andrew Hecht, of Seeking Alpha – and a frequent contributor to tED. “Copper could be a low-risk and high reward play on price dips if the critical support level at $2.8740 holds over coming weeks. If that bottom can hold, stocks begin to decline, and the U.S. and China can come to terms on a trade agreement that avoids a trade war and tariffs, we are likely to see a challenge of critical resistance on the upside of $3.4445 per pound, the 2014 high in the red metal.”

Don’t Forget to Claim Inventory

Another key factor in keeping an eye on copper is the inventory levels. Many investors may not know that the warehouse inventories on the London Metals Exchange have risen to the highest level since 2014. The five-year chart that tracks LME copper inventories shows they recently topped over 388,000 metric tons, up from 180,000 a year ago.

Source: LME/Kitco

The price of copper typically moves up and down inversely with inventories. “The fact that copper held its critical support level and did not violate the pattern of higher lows for over two years in an environment where warehouse stocks more than doubled is a sign of strength for the copper market,” adds Hecht.

Any Breaks Ahead?

Concerns over the U.S.-China trade spat will most likely be a topic of discussion at the spring meetings of the International Monetary Fund and the World Bank that kicked off Monday.

Traders will also be looking ahead to U.S. economic reports and a slew of Fed speakers that will most likely affect the U.S. dollar. Here is a look at those topics and other significant events likely to impact the markets this week, thanks to Investing.com.

Monday, April 16

The week-long spring meetings of the IMF and World Bank Group started in Washington.

Switzerland published data on producer price inflation.

The U.S. released data on retail sales and manufacturing activity in the New York region.

Tuesday, April 17

The Reserve Bank of Australia is to publish the minutes of its latest policy setting meeting.

China is to release data on first quarter economic growth, fixed asset investment and industrial production.

The UK is to publish its latest employment report.

The ZEW Institute is to report on German economic sentiment.

Canada is to produce data on manufacturing sales.

The U.S. is to report on building permits, housing starts and industrial production.

San Francisco Fed President John Williams is due to speak at an event in Madrid while Fed Governor Randal Quarles is to speak in Washington.

Wednesday, April 18

The UK is to publish data on inflation.

The euro zone is to release revised inflation data.

The Bank of Canada is to announce its latest monetary policy decision and publish its rate statement. The announcement is to be followed by a press conference.

New York Fed President William Dudley is to speak at an event in New York while Fed Governor Randal Quarles is to speak in Washington.

Thursday, April 19

New Zealand is to release inflation data.

Australia is to publish its latest employment report.

The UK is to produce data on retail sales.

The U.S. is to release the weekly jobless claims report along with data on manufacturing activity in the Philadelphia region.

Fed Governor Lael Brainard and Fed Governor Randal Quarles are due to appear at separate events in Washington.

Friday, April 20

Canada is to round up the week with data on retail sales and inflation.

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Jim Williams

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