Copper, Crude Oil Prices Surge. Eyes on Fed Chair Jerome Powell for Next Moves

Copper, Crude Oil, Fed Chair Jerome Powell, YCC, Commodities Briefing – Talking Points:

Copper and crude oil prices extend dominant uptrends as US Dollar sinks
Traders may be pricing in Fed yield curve control on medium-term rates
All eyes on Jerome Powell as market sentiment improves to start Tuesday

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After Monday’s 1.64% gain, copper futures are one step closer to the best month since November 2016, where the red metal gained about 18.9%. At the time of writing, COMEX copper futures are up roughly 17.8% in February. Surpassing the performance in November 2016 would mean the best month since 2009. The rally in the red metal was not exclusive to it, as it was a generally bullish day for commodities and precious metals.

This is despite a mixed session for market sentiment, one that seemed to benefit commodities. While the tech-heavy Nasdaq Composite slumped 2.46% on Monday, the Dow Jones Industrial Averaged managed to sneak in a 0.09% gain. In fact, the energy sector was among the three best-performing segments in the Dow. Crude oil prices climbed 5.5 percent over the past 24 hours.

What started off as a rosy day for sentiment reversed course into the final trading hours of Monday’s session. This initial optimism helped boost copper and oil prices. But, as market sentiment deteriorated, the US Dollar lost some of its ground, offering more momentum to commodities. For both copper and crude oil, supply constraints and heavy demand expectations continued to support their price trends.

Sentiment is improving thus far, with futures tracking Wall Street pointing in the green heading into European and North American hours. This is leaving copper and crude oil prices in a position to extend gains. But, all eyes are on Fed Chair Jerome Powell, who will be presenting the central bank’s semi-annual monetary policy report. He may be questioned about rising longer-term Treasury yields, reflecting optimism in the outlook.

There may be a degree to which markets are pricing in some aspects of yield curve control (YCC) from the Federal Reserve. As such, if there isn’t a mention of it ahead, then precious metals like copper and gold could be at risk of a near-term pullback. Rising longer-term government bond rates are slowly sapping away potential from non-yielding assets. If the former keep rising, then gains in the latter may slow.

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Copper Technical Analysis

Copper futures extended gains past peaks achieved in 2012, taking out the 3.9390 – 3.9895 resistance zone last week. This has exposed all-time highs achieved in 2011, making for a critical zone of resistance between 4.5400 and 4.6495. Near-term downside risks seem to be elevated, with the 20-day Simple Moving Average hovering below around 3.7405. This could come into play in the event of a deeper pullback.

Copper Futures Daily Chart

Chart Created Using TradingView

Crude Oil Technical Analysis

Crude oil prices are nearing the 2020 peak at 64.62. However, negative RSI divergence does warn that upside momentum is fading. A turn lower may place the focus on a rising trendline from November – red line on the daily chart below. Falling under it could open the door to a larger pullback.