Copper has been rallying like crazy in the past few months amid a pickup in
global growth, Chinese stimulus measures and concerns over tightness in global
mine supply. Unfortunately, as it’s often the case, the rally attracted the
momentum players and the price got overstretched leading to an aggressive selloff without a clear catalyst.

All else being equal, if we keep seeing positive economic growth and maintain
the risk-on sentiment, we could see new highs in the months ahead with
the Chinese officials likely increasing the policy support if the data were to show
some deceleration.

Copper
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that copper experienced an aggressive correction to the downside after
setting a new all-time high. The price bounced and consolidated on the trendline
where we have also the 61.8% Fibonacci
retracement level for confluence.

This is where we can expect
the buyers to step in with a defined risk below the trendline to position for a
rally into a new all-time high. The sellers, on the other hand, will want to
see the price breaking lower to increase the bearish bets into the 4.47 level.

Copper Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the consolidation between the trendline and the 4.85 level. A
breakout to the upside should see the buyers gaining more conviction and
increase the bullish bets into a new all-time high. On the other hand, a
breakout to the downside will likely trigger another selloff with the sellers aiming
for the 4.47 level as the first target.

Copper Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see even better the current rangebound price action between the 4.75 support
and the 4.85 resistance. Note that we have another support at 4.70, so if we
were to see the price dropping below the 4.75 support it wouldn’t yet signal more
downside to come.

Upcoming
Catalysts

Today we get the US Consumer Confidence report where the
focus will likely be on the labour market details. On Thursday, we will see the
latest US Jobless Claims figures. Finally on Friday, we conclude the week with
the Chinese PMIs and the US PCE report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Latest inflation data points to worries that the BOJ is running out of time
• ECB’s Centeno: Interest rate reduction process is about to begin
• Fed’s Kashkari: No hurry to cut interest rates
• Fed would have benefited from earlier decision to taper, end QE in 2021 – Bowman
• Germany April wholesale price index +0.4% vs +0.2% m/m prior
• UK May CBI retailing reported sales 8 vs -44 prior
• China president Xi urges promoting high-quality and sufficient employment conditions
• Are precious metals set for a stronger bounce this week?

Markets:

• CHF leads, USD lags on the day
• European equities lower; S&P 500 futures up 0.1%
• US 10-year yields down 0.6 bps to 4.466%
• Gold down 0.2% to $2,345.41
• WTI crude up 1.4% to $78.84
• Bitcoin down 2.0% to $68,242

It was a quiet session for major currencies with the dollar keeping marginally lower on the day.

The euro and the franc gained slightly, with EUR/USD moving back up to retest the April high of 1.0885. But offers and large option expiries at 1.0900 is keeping a lid on things for now. Meanwhile, USD/CHF moved back down by 0.4% to test the 0.9100 mark.

Besides that, the aussie and kiwi are also just a touch higher but nothing to really shout about. AUD/USD is up 0.2% to 0.6667 as it continues to recoup losses from last week.

In the equities space, stocks were more optimistic early on with S&P 500 futures moving up by 0.3%. But as we look towards US trading now, we’re seeing those gains pared back to just 0.1%. In Europe, major indices also opened higher but are now trading lower as the risk optimism is tempered with slightly.

As for commodities, gold and silver are getting a bit of a check back following yesterday’s gains. It isn’t much but it speaks to some mixed flows on the day even with the dollar looking sluggish still.

US traders will be back from the long weekend and will have to contend with month-end flows before more key US data later in the week.

This article was written by Justin Low at www.forexlive.com.

• Inflation is under control

Once again, it just reaffirms that we will see a rate cut at next week’s meeting. It will be more interesting to see their comments after that is over and done with.

This article was written by Justin Low at www.forexlive.com.

Sentiment can be
described simply as the mood of the market. Sentiment should be the primary
concern for short-term traders.

It can last an hour, a
session, a day or weeks depending on what is causing it and how much importance
the market gives it. Thus, you have to identify the reasons why the market
behaves in a certain way.

Risk sentiment can be
fickle. You will see sometimes the market focusing on something and moving
accordingly but then suddenly something else happens and the previous concern
is completely forgotten.

You should also take note
of which session is driving the sentiment, because if you get some risk off in
the European session due to some negative piece of news, it doesn’t mean it
will be taken as equally negative in the North American session.

This may be due to
further reports calming down the waters or just not in line with the prevailing
theme, so it may be actually traded in the opposite direction in the new
session with traders taking advantage of better prices.

These swings in risk
sentiment are generally triggered by fundamental catalysts. That’s why it’s
vital that you keep yourself updated on the latest developments because
sentiment can go against the big picture fundamentals and if you are trying to
enter in line with the fundamentals but against the current sentiment, you may
find yourself in trouble with prices that keep going against you.

It’s better to align
sentiment with big picture fundamentals for the best results.

RISK-ON/RISK-OFF

The two types of
sentiment are risk-on and risk-off.

• Risk-on is when the market doesn’t see
  risks and you will often see risk assets like equities, commodities and commodity
  currencies rallying. Basically, assets that give a high yield or more bang for
  the buck.
• Risk-off, on the other
  hand, is when the market does see risks and goes for safer assets, like
  bonds, safe-haven currencies and so on.

Generally speaking, positive
economic growth or expectation of more growth leads to risk-on sentiment while a
negative growth picture triggers the risk-off regime.

WHY IT’S IMPORTANT?

Knowing the risk sentiment regime is fundamental. For example, if someone
were to tell you that the S&P 500 is up 5% on the day, you could guess that
the Australian Dollar or copper were also up on the day without even looking at
the charts.

One of the main reasons for such correlation is the economic
interrelationship between the various assets, which got stronger and stronger
with financial globalization.

The concept of risk sentiment is also very important in selecting the
assets that will move the most during different types of sentiment. For example,
during risk-on, you will see lots of stocks rallying but some of them will increase
much more than others. In the FX space, you might see emerging market currencies
appreciating faster and providing you with great carry trades.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior -44

The good news for the UK is that the retail sales balance is seen rebounding strongly in May. The headline reading is the highest since December 2020. Adding to that, the quarterly measure of selling price inflation in retail is seen slowing to its lowest since August 2020. It will be a welcome relief, if translated to the hard data, after the poor April report as seen here.

This article was written by Justin Low at www.forexlive.com.