Asian Open: Copper breaks out in style following US CPI

To be fair, plenty of markets broke out during the predominantly weak USD environment, but copper’s large daily volume and clear break of resistance really caught our eye.

Charts (1)

Wednesday US cash market close:

  • The Dow Jones Industrial rose 38.3 points (0.11%) to close at 36,290.32
  • The S&P 500 index rose 13.28 points (0.29%) to close at 4,726.35
  • The Nasdaq 100 index rose 60.973 points (0.38%) to close at 15,905.10

Asian futures:

  • Australia's ASX 200 futures are down 0 points (-0.01%), the cash market is currently estimated to open at 7,438.90
  • Japan's Nikkei 225 futures are down -90 points (-0.31%), the cash market is currently estimated to open at 28,675.66
  • Hong Kong's Hang Seng futures are up 173 points (0.71%), the cash market is currently estimated to open at 24,575.17
  • China's A50 Index futures are up 145 points (0.94%), the cash market is currently estimated to open at 15,656.14

20220113moversCI

Equity markets weathered the well telegraphed inflation print of 7%, although that may not have been the case had Jerome Powell not soothed inflationary concerns at his confirmation hearing the day prior. The S&P 500 rose 0.2% by the close although (like DJI and Nasdaq) printed small Doji’s. But given the levels of inflation and hawkishness of the Fed that could be taken as a positive sign overall.

The ASX 200 is holding above its 50-day eMA and trend support from the December low, yet 7470 resistance continues to cap. But, even if we are to see a break above here, we’d want to see a break above 7500 before switching to a bullish bias. Until then, we remain neutral.

20220113moversASXci

ASX 200: 7438.9 (0.66%), 12 January 2022

  • Energy (3.02%) was the strongest sector and Consumer Staples (-0.59%) was the weakest
  • 8 out of the 11 sectors closed higher
  • 3 out of the 11 sectors closed lower
  • 5 out of the 11 sectors outperformed the index
  • 133 (66.50%) stocks advanced, 51 (25.50%) stocks declined

Outperformers:

  • +1.87% - CSL Ltd (CSL.AX)
  • +4.75% - Afterpay Ltd (APT.AX)
  • +1.64% - Macquarie Group Ltd (MQG.AX)

Underperformers:

  • -4.19% - Domino's Pizza Enterprises Ltd (DMP.AX)
  • -3.52% - Reece Ltd (REH.AX)
  • -2.34% - Metcash Ltd (MTS.AX)

 

US inflation hits its high consensus, dollar gets whacked

20220113moversFXci

Inflation rose 7% y/y as expected in December, which is its highest rate in 39 years. Core CPI, which excluded food and energy rose 5.5% y/y, it’s highest level since Feb 1991. As Joe Biden and his low approval rating know full well, these inflation numbers are not to be taken lightly. But form a trader’s perspective they did come in as expected which removes the element of surprise. And with Jerome Powell effectively confirming a March hike, markets pricing in an 80% chance of said hike and many expecting 3 more this year, traders were keen to book profits after the release.

The US dollar was the weakest currency and fell broadly against all of its major peers, which saw USD/CHF fall over 1% and USD/JPY break firmly below 115. The US dollar index finally broke out of its 2-month range, below 95.50 support and has challenged the June trend support. Naturally, this allowed the euro to hit a 2-month high and close firmly above 1.14. The Australian dollar was the strongest major currency, with the Swiss franc and New Zealand dollar close behind and all rising over 1% against the US dollar.

Commodities embraced the weaker dollar with metals (mostly) leading the way

With a weaker dollar and strong (even if a bit too hot) economy, commodities were quick to rally. The Thomson Reuters core commodity index rose another 1.5% after hitting a 7-year high yesterday. Natural gas is up nearly 40% over the past 8 days alone and was the strongest commodity of the session, with oil rising around 1.5%. Excluding palladium, metals were also broadly higher with gold reaching a 1-week high of 1227, silver rose 1.8% and closed firmly above $23. Yet it was arguable copper which stole the metal show.

Copper breaks out with a vengeance

20220113copperCI

We noted copper’s potential to breakout ahead of yesterday’s European open, and it did not disappoint. Rising over 4% by its daily high on more than double it’s daily average volume, it’s a classic breakout from a flag pattern on the daily chart. The flag projects a target near the October high around $4.83 and easily cleared $4.50 resistance on a closing bases. Given it has been slowly building a base since the $4.00 low and higher lows have increased in magnitude, it is possible we may see it return to its loner-term trend. But for now, we’re happy to target the highs around $4.75 whilst prices hold above the $4.30 low. But if this is flag breakout then prices should not retreat back beneath the flag itself.

 

What is copper trading and how to understand copper prices?

 

Up Next (Times in AEDT)

20220113calendarAEDT

 

How to trade with City Index

You can easily trade with City Index by using these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

 

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.