Copper futures weekly recap, April 28 – May 2

Copper futures rebounded on Friday after better-than-expected employment data from the US and a rise in factory orders were in line with previous economic activity gauges signifying underlying economic strength, which offset negative sentiment from dismal first quarter GDP growth. The industrial metal however remained pressured to the downside as downbeat data points from China continued to spur worries of economic slowdown in the worlds biggest consumer.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in July rose by 1.6% on Friday to close the session at 3.0700 per pound, having shifted in a daily range between $3.0785 and $3.0135 a pound. The red metal was unchanged on Monday, followed by three straight session of losses, but trimmed its weekly decline to 0.7% following Fridays gains.

Copper drew support on Friday after the Labor Department reported that the US unemployment rate stood at 6.3% in April – the lowest since the very start of the financial crisis in Autumn 2008. Meanwhile, nonfarm payrolls jumped by 288 000 for the month of April, marking the highest rise since May 2010.

A separate report by the Commerce Department showed that factory orders in March edged up by 1.1%, compared to 1.5% in February. Albeit trailing expectations for a 1.4% jump, this was a second straight month of expansion following a 2.2% drop in the December-January period, confirming the US economy had recovered from an extraordinary harsh winter which had suppressed economic activity.

The better-than-expected data offset previous negative sentiment after data by the Bureau of Economic Analysis showed GDP growth for the first three months of 2014 stood at an annualized 0.1% due to rough winter conditions bearing down on economic activities.

Despite the dismal growth, policy makers leaned on the economys underlying strength and further trimmed Feds monetary stimulus by another $10 billion on Wednesday.

Moreover, personal spending for March in the US was reported to have increased the most in more than four years on Thursday, while the ISM manufacturing gauge exceeded expectations to report 54.9 in April.

Earlier on Friday the final reports on April’s factory PMI in the Eurozone offered sizable support for copper. Germany recorded a slight slow-down in the pace of industrial activities growth to stand at 54.1, while Italy and France registered gains on the advance readings, to settle at 54.0 and 51.2, respectively. The single-currency bloc as a whole also added to preliminary data, to log at 53.4.

Despite the positive sentiment readings from the US and EU had sparked, the industrial metal remained pressured to the downside by worse-than-expected data from China, the metals top consumer. Government data on manufacturing output for April revealed a worse-than-projected PMI at 50.4. Albeit an improvement from Marchs reading of 50.3, it trailed expectations for a gain to 50.5.

Helen Lau, a commodity analyst at UOB Kay Hian Ltd., said for Bloomberg: “This China PMI data is kind of disappointing. To make the copper price rebound, we really need better-than-expected numbers.”

Outlook

Market players are eyeing upcoming manufacturing data from China, as well as signs of economic strength in other major consumers.

On Monday, HSBC in collaboration with Markit Economics will release their final Chinese manufacturing PMI for April. The preliminary reading released on April 23rd showed a slower-than-expected rebound to 48.3 from March s final figure of 48.0, which was the lowest level since July.

Also due on Monday is the Eurozones Sentix Investor Confidence index, which is projected to post a minor advance to 14.2, while a separate report may show producer deflation remained unchanged at -0.2% in April and accelerated to an annualized -1.8%, compared to -1.7% in March.

Meanwhile in the US, the Institute for Supply Management is expected to report that activity in the US services sector continued to recover after growth in February slowed down the most since August 2010. The ISM non-manufacturing PMI is expected to have registered at 54.1 in April, up from 53.1 in March.

On Tuesday, data is poised to show retail sales in the Eurozone fell by 0.4% last month but grew at an annualized 0.9% from a month earlier. On the other side of the Atlantic, the US trade deficit is expected to have narrowed to $40.50 billion in March.

Due on Wednesday are retail sales in Australia, poised to have gained, and the Chinese HSBC Services PMI. In Europe, data is expected to show factory orders in Germany probably rose by 0.4% last month, while industrial production in France accelerated by 0.3%.

On Thursday, Chinas National Bureau of Statistics will release April trade data, which may show a third straight monthly decline in exports, while imports are projected to have rebounded from last months 11.3% plunge.

On Friday, Chinas statistics bureau will likely report consumer inflation in the worlds second-biggest economy declined for a second month in April, by 0.1%. Year-on-year, the CPI index may have fallen to 2.1%, down from 2.4% in the preceding month, while producer deflation is expected at an annualized -1.8%, down from -2.3% in March.

Also due on Friday are Italys industrial output figures, coupled with industrial and manufacturing production data from the U.K.

Technical view

According to Binary Tribune’s daily analysis, in case Copper July futures manage to breach the first resistance level at $3.0945 per pound on Monday, they will probably continue up to test $3.1190. In case the second key resistance is broken, the industrial metal will likely attempt to advance to $3.1595.

If the contract manages to breach the first key support at $3.0295, it may continue to slide and test $2.9890. With this second key support broken, the movement to the downside will probably continue to $2.9645.