HG copper jumped yesterday on the Trump administration’s decision to resume talks with China while delaying some tariffs from September 1 to December 15. Although we are seeing the rally fade somewhat today the white metal’s ability in recent weeks to manage a deterioration technical and fundamental outlook could bode well for the short-term outlook.
The technical picture has improved following the failed attempt to break below the $2.57/lb neckline on the weekly chart. The fundamental outlook has been weighed down by concerns that the trade war would accelerate the slowdown in global growth, thereby erode demand, not least from the world’s two biggest consumers.
Macro driven funds looking for a hedge against recession have accumulated a record short in HG copper futures. During a two-week period to August 6 money manager more than doubled their net-short to 74.6k lots, a position which is now somewhat under water. Continued short covering will find resistance at $2.67/lb. and most importantly $2.70/lb.