Copper, natural gas, China Economic slowdown, temperature prospects – talking points
- Copper prices on the backFears of a slowdown in the Chinese economy materialize.
- Natural gas may rise in warmer temperatures throughout the southern and western United States
Copper basic prospects
Copper prices hit earlier this week because US dollar got up. The widespread risk factor in global financial markets sent traders a greenback, providing liquidity in times of uncertainty. The root cause of the wider movement also has a negative effect on the red metal. Traders are backing their portfolios against the second Covid wave, driven by a highly transferable delta variant.
Initially, traders did not feel a large increase in Covid cases in either the Asia-Pacific region or the United States. However, as governments responded to the new threat, foreclosure and social exclusion measures were blocked, fears of an economic slowdown seemed to permeate market sentiment. Closures are particularly toxic to economic activity. China, Australia and most recently New Zealand have closed in the last few months.
China, a country that is strict about the Covid outbreaks, announced some gloomy economic data earlier this week. Accordingly DailyFX economic calendar, fixed investment, industrial production and retail sales all fell short of expectations in July and slowed down compared to the previous month. This set the tone for the copper trade this week. Slower economic growth means lower demand in an economy that makes poor predictions for industrial metals.
On the supply side, copper price problems arose as workers at the Escondida mine, the world’s largest copper mine, working with BHP, threatened to strike. But a miners’ union said late last week that it had reached an agreement with an operator based in Australia. The agreement removed doubts about short-term problems in the metal supply chain.
Basic prospects for natural gas
Natural gas prices have remained largely unchanged this week, following the largest weekly decline since February last week. The stronger USD may be the upper limit because a stronger Greenback makes it more expensive for foreign buyers to buy goods, which can put pressure on liquefied natural gas (LNG) exports.
Elsewhere, the U.S. regulator declared the first Colorado River water emergency in history. The river in the western United States originates from Lake Meade, the largest reservoir in the United States. It has emptied at an almost exponential rate, now with only 35% capacity. This is due to the perennial drought that has destroyed the area of vital rainfall.
Dams control the flow of water from these reservoirs. Energy is created when water passes through a curse that passes through generators. Less separated water means less energy. This may see greater dependence on natural gas as an energy source in the region in the future. The U.S. Rehabilitation Bureau predicts that energy production at the Hoover Dam could decline by up to 2.5% year-on-year over the next 5 years.
The near-term outlook could raise prices in the western and southern United States in hotter weather. According to the National Weather Service’s 8-14-day temperature probability forecast, these areas may see above-average mercury readings. Hotter weather increases energy consumption when people crank air conditioners. It promises natural gas consumption and therefore prices.
Copper technical outlook
Copper prices broke the trend line on Tuesday from February, which puts the short-term outlook down. However, 78.6% of the Fibonacci retracement from the lowest in June to July appears to be supportive. Bulls need to take back the trend line to put prices back on a solid footing. Alternatively, further tough action may notice a simple moving average of 200 days rising into focus.
Copper daily schedule
The chart is created using TradingView
Technical outlook for natural gas
After falling at the beginning of this week, natural gas prices are on a trend line. Prices will rise higher if support remains, the peaks of several years will remain at a remarkable distance, which was reached just at the beginning of this month. However, if the trend line breaks, it can make the maps hard. A rising 50-day mobile moving average may support prices falling.
Natural gas daily schedule
The chart is created using TradingView
Natural gas, copper COMMERCIAL ASSETS
– Written by Thomas Westwater, DailyFX.com analyst
Be in touch Thomas, use the comments section or below @FxWestwaterTwitter