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Copper falls back near 12-month low

Summary:

  • Copper moving back near lowest level in a year
  • Chinese investor unwinds $1B bet
  • China’s slowing economy weighing on the metal and AUD

The price of Copper is trading lower once more today, with the industrial metal falling back near its lowest level in a year. One interesting point to note about the market lately is the number of red closes seen with the last 9 sessions all ending lower - even though there has been some gaps up in this time. 

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 Copper is lower once more today with the market not far from a 1-year low. Source: xStation

Looking at Copper related news an interesting story from the far east grabs the attention with the liquidation of a $1B bet placed by a Chinese investor an obvious source of some of the latest selling pressure. Data from the Shanghai Futures Exchange showed a huge net long futures position of 36,050 lots has been wound down to around 10,000 lots by yesterday. This represents around $800m worth of Copper contracts being liquidated in the past 4 trading sessions. 

Retaining our focus on China, a slowdown in the world’s second largest economy could be one of the chief causes for the recent weakness in Copper. The Chinese composite (CHNCOMP on xStation) has exhibited a fairly close correlation to the price of Copper for much of this year, but a fall in the index which began a few weeks ago has weighed on the metal. 

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 Weakness in the CHNCOMP has weighed on the price of Copper and led the metal lower. Source: xStation

The recent declines in Chinese equities have largely been overlooked by much of the media, but they have been fairly large in size and the benchmark has now fallen back into  bear market territory - as defined by a 20% fall from a prior peak. The Australian dollar is also sensitive to both the Chinese economy (which can be proxied by the index) and the price of Copper, as Australia produces a fair amount of the industrial metal. Therefore it is not too surprising that the Aussie has also been under pressure in recent weeks, hitting its lowest level since the start of last year just last week. 

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 The AUDUSD has also fallen lower as the Chinese index declines. Source: xStation

 

 

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