Copper Market Commentary - Monday, April 29

Copper Breaking OutThe rally in copper prices continues this week with copper futures breaking out to fresh highs for the year across early trading on Monday. The market has been on a tear this year with futures now up around 25% from the YTD lows. The rally this year comes despite a broad uptrend in USD which has gained steadily alongside shifting Fed expectations. Indeed, despite the market pushing out its Fed easing expectations, and the growing risk of smaller-than-projected easing this year, copper has continued to push higher. The FOMC and NFP this week both present key volatility risks which might see copper prices correct lower if USD is sharply bid. However, the greater focus remains on supply issues. Supply/Demand IssuesCopper demand has been surging recently, while supply has been falling. A pickup in activity in Chinas has been a key driver of this dynamic while economic resilience in the US has also fed into the picture. Copper mine closures have been a key theme of industrial markets in recent years, leading to heavily weaker supply. With prices rising now, some players forecast that copper will have to hit around $12k to incentivise the building of new mines, which would help even out the supply. BHP DealNews that BHP Group has made a $39 billion bid to buy Anglo-American is helping drive prices higher this week. If successful, the bid will make BHP the biggest global copper producer, holding around 10% of supply. The bid has been interpreted as an indication that bullish copper forecasts are becoming more entrenched, and should keep futures prices supported near-term.Technical ViewsCopperThe rally in copper prices is seeing the market testing above the 4.5785 level currently with price now mobbing firmly above the bull channel highs. Above here, focus is on the 4.8965 level next, in line with bullish momentum studies readings. To the downside, 4.2975 will be the key support to watch.