Morning Futures Roundup

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Copper Rally Starting to Tarnish?

 Fundamentals

After trading to record highs earlier this year, the Copper futures bull market may be stating to waver, despite the continuing weakening of the U.S. Dollar, which has been a catalyst in the current commodity-wide bull market. Keen interest is being paid by Copper traders to the economic conditions China, where continued talk of further interest rate hikes to help slow the country's rising inflation threat could eventually seriously hurt demand for commodities, including Copper.

Copper inventories have been building in exchange warehouses lately, with London Metal Exchange (LME) inventories now totaling 460,100 tons, which are the highest inventory levels in nearly11 months. Many traders are also awaiting the outcome of the two-day Federal Open Market Committee meeting (FOMC) for any signs that the Fed will announce their intentions on ending QE2 or will embark on further accommodative policies.

Should the Fed start to hint that tighter monetary policies are on the horizon, we could see a sharp increase in the U.S. Dollar, which in turn could send Copper prices tumbling, as many traders begin to liquidate their long positions and momentum shifts back to the bears for the first time in nearly 2 Ω years.



 Technical Notes

Looking at the daily continuation chart for Copper futures, we notice prices have begun to consolidate the past couple of months, after reaching new all-time highs back in mid-February. In the short-term, control of the Copper market seems to be passing between both bulls and bears, as prices have been trading on both sides of the 20-day moving average. Longer-term traders will note that the 200-day moving average is still well below current prices levels, which are hovering near the 3.9500 area.

There is a bearish divergence in the 14-day RSI that called the recent highs, and now this momentum indicator has moved to a neutral reading just below the 50.00 level. This is now in confirmation with the consolidation currently seen in the daily price chart. The recent low at 4.1920 is seen as near-term support for July Copper, with resistance found at the April 11th high of 4.5500.


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