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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
COMMODITIES
- We saw recently that selling pressure on ‘risk on’ commodity copper has been rising in recent weeks after reaching an all-time high at 501 on March 11; hence, investors have been questioning if the recent correction is only starting.
- Weakening fundamentals (strong deceleration in Chinese economic activity) have been pricing in cheaper copper prices in the near to medium term (see link to full piece below).
- With many economists expecting inflation to be close to its peak (some speculate that US inflation has peaked at 8.5% in March), investors’ interest to be long ‘risk on’ commodities (particularly copper) could start to ease in the near term, therefore increasing the downside risk on the industrial metal.
- The chart below shows that the peak in US 5Y breakeven inflation at 3.73% in the end of March corresponds (more or less) to the peak in copper prices, and that further consolidation in breakeven rates will add more pressure on copper prices.
- The front month futures is down 15% since its all-time high of 501 reached in March. Strong support to watch on the downside stands at 400, followed by 388.30 (38.2% Fibo retracement of the 206 – 501 range).
Link to recent copper publication (May 18th):
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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