China Manufacturing Jump Underpins Copper
China Data Boost
Copper prices are bouncing back today following a sharp move lower yesterday. The recovery comes amidst a cooling in USD as the Dollar pulls back from yesterday’s multi-month highs. However, sentiment is also being lifted by better-than-forecast Chinese data . Overnight, the RatingDog Chinese general manufacturing PMI was seen jumping to 52.1 last month, up from 50.3 prior. This marks the third consecutive month of increases in the reading, which is now at its highest level since December 2020. The breakdown of the data is particularly encouraging with widespread growth seen across all sub-components. Output hit its highest level in over two years while new orders rose for a ninth straight month. Foreign demand surged to its highest level since Q3 2020 and, notably, employment marked a second consecutive month of increase, the first time this has happened since mid-2021.
USD & Iran Risks
With signs of improved factory activity in China, the near-term outlook looks more positive for copper prices here. However, USD remains a key driver and volatility in the greenback will remain a key threat to copper prices near-term. Today, risk appetite has rebounded somewhat on hopes that the Strait of Hormuz can remain open (or partially open) following Trump’s assurance of US military protection for cargo ships. However, the risk of afresh escalation in the conflict with Iran means USD remains vulnerable to upside reactions on fresh-safe haven demand, which will weigh on copper if seen. On the other hand, any surprise news that the US and Iran will negotiate should help lift commodities amidst a broader relief rally in risk assets.
Technical Views
Copper
The market remains atop the 5.8550 level for now, supported too by the bull channel lows. While this area holds as support, focus is on a continuation higher and a breakout to fresh highs. If we break below the channel, next support is seen around the 5.6260 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.