Copper Weekly Fundamental Analysis – week of May 30, 2016

Copper closed the week at 2.099 seeing a gain of 2.58% for the week. Copper has gone through a recent bought of weakness as the US dollar has climbed amid expectations that the Federal Reserve will hike its benchmark interest rate in June. Copper is a dollar-denominated commodity; therefore, a stronger dollar is bad for copper prices. On Thursday, the greenback which compares the value of the US dollar against a basket of other currencies, declined.

In addition, on Thursday oil futures were higher, crossing above the $50 per barrel price point a few times during the session. Oil was higher amid a decline in inventories ahead of the kick-off of peak demand season, which, officially, is the Memorial Day Holiday. Copper and oil are commonly traded together in a basket of commodities, therefore strength in one commodity often has a spill-over effect to the other.

The recent strength in copper is not seen as sustainable. In order for copper demand to remain high, China’s economy has to be strong, and right now, there remains reason to believe that the country’s economy is on shaky footing. Furthermore, the country recently moved a lot of copper into warehouses, and this metal is staying in storage. This stockpiled metal could prevent China from embarking on fresh purchases, and that could impact prices. Analysts are expecting weaker copper prices in the second half of the year.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week: