Copper
Overnight, we got Freeport results, and they suggested that there are still some concerns with the Grasberg mining operation, and therefore it is squeezing a little bit of supply. Not drastically so, but enough that it is causing some bottlenecks.
It’s worth noting that today we get the FOMC interest rate decision, and of course copper will be sensitive to the idea of financing costs. Technically, this is a market that has bounced quite nicely from the $6.40 level, and I like it for continued strength, but I’m looking for short-term pullbacks in order to take advantage of it.
Production, according to Freeport last night, was 832 million pounds of copper in the third quarter. They sold 749 million pounds of that, so there is still strong demand out there.
NASDAQ 100
The NASDAQ is testing the 50-day EMA as we head towards that Federal Reserve interest rate decision. The question, of course, will be whether or not the interest rate outlook supports higher valuations or not. It is worth noting that we are in the middle of earnings season, but we also, again, have that Federal Reserve decision at 2 p.m. Eastern.
I suspect we pull back. What I’m hoping for is a pullback early in the day and some type of bounce during the press conference. That’s what would catch my attention. I still believe that the 29,000 level could end up being supported all the way down to 28,750. It’s a pretty significant barrier.
If we start to break significantly and meaningfully above the 50-day EMA, FOMO may chase the NASDAQ to the upside heading into the meeting. I have seen that previously as well. Remember, tomorrow we do have an 8:30 a.m. third-quarter GDP release in New York, so it’s worth watching. Yields are pretty flat during the session. We’ll keep an eye on those as well.
DAX
In Germany, the DAX faces a couple of different things. We have the Federal Reserve announcement, just as we do everywhere else, but we also have the ECB monetary policy meeting in Europe and a press conference on Thursday. So, a little hesitancy here would not surprise me at all to see a little bit of a pullback.
Copper Price Forecast
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See all Copper forecastsAny deep correction here, for me, ends up being a buying opportunity. Some recent corporate evidence provides a concrete anchor for some type of recovery. SAP, for example, about a week ago reported revenue growth of 26%. That’s a major factor in the DAX.
I think what we’re looking for is a less restrictive ECB message or perhaps an overreaction to the downside. This is more or less a 24-hour market I’m watching. I’m waiting to see how it behaves in the morning, or if we get some type of front-running to the downside that I might be able to take advantage of.
USD/JPY
Finally, the U.S. dollar continues to grind higher against the Japanese yen. That being said, keep in mind we get the Federal Reserve later, but we also get the Bank of Japan on Friday, and it’ll be interesting to see what they have to say.
I don’t think the Bank of Japan can do much. This is going to be about the Federal Reserve, and unless the Federal Reserve becomes overly dovish, I anticipate any pullback probably attracts buying pressure as the interest rate differential continues to favor America.
It’ll be policy guidance more than anything else, I think, that drives this. I also recognize that the Bank of Japan could say some things to scare the market on Friday, but I don’t see that being lasting. I like buying dips. I am holding this pair. I’m looking to add on dips and build a bigger position, kicking off the carry trade.