Copper trading outlook: futures swing on strong dollar, durable goods orders

Copper shifted between gains and losses on Tuesday despite US economic growth reaching the highest in more than a decade, dragged by a strong dollar and an unexpected drop in durable goods orders.

Comex copper for delivery in March fell 0.37% to $2.8620 per pound by 15:22 GMT, having shifted in a daily range of $2.8805-$2.8545. The industrial metal slid 0.42% on Monday to $2.8725, having touched a one-week high of $2.9050.

The Commerce Department’s Bureau of Economic Analysis reported that economic growth in the US accelerated to 5.0% in the the third quarter, the fastest since Q3 2003, as US consumers and businesses spent more than initially estimated. This compared to analysts’ projections of 4.3% and a preliminary estimate of 3.9%.

The US dollar continued its march, trading near the highest in nine years against a basket of major trading peers. The US dollar index for settlement in March stood at 90.270 at 15:22 GMT, having shifted in a daily range of 90.405-89.845. The greenback gauge added 0.12% on Monday to settle at 89.949. A stronger dollar makes commodities priced in it more expensive for foreign currency holders and limits their appeal as an alternative investment.

Durable goods orders unexpectedly dropped in November as the cooling global economy induced less or little-changed demand for computers, metals and electrical equipment. Orders for goods meant to last more than three years fell by 0.7% in November, confounding projections for a 3.0% jump. A core measure slid 0.4%, rebutting forecasts for a 1.1% gain, while durable goods orders ex defense contracted 0.1% as opposed to an expected 1.6% jump.

A separate report showed that sales of newly built homes in the US declined by 1.6% in November to an annualized rate of 438 000, defying expectations for a jump to 460 000. This added to data by the National Association of Realtors which showed yesterday that purchases of previously owned homes in the US fell more than expected last month. Existing home sales slid 6.1% in November to a 4.93 million annual rate, compared to projections for a 0.9% drop after a 1.4% increase in October.

In other reports, December consumer sentiment surged to a pre-recession high, with the corresponding Thomson Reuters/University of Michigan index jumping to 93.6 from 88.8 in November. Personal income rose by 0.4% in November on a monthly basis, compared to 0.3% in October, while personal spending increased by 0.6%.

The metal has found itself under increasing pressure amid signs of a supply glut that would shift this years global deficit to a hefty surplus in 2015, due largely to economic exhaustion in China, the metals biggest consumer.

Some support was drawn as calculations by Reuters showed that Chinas implied consumption of refined copper jumped by 8.9% on a monthly basis in November, reversing the previous months contraction.

ANZ Bank said, cited by CNBC, that next years first half will be dominated by supply-side issues, while demand remains muted. However, the second half should show an improvement, ANZ said, as increased supply-discipline and stabilizing growth begins to emerge.

Pivot points

According to Binary Tribune’s daily analysis, the March contract’s central pivot point stands at $2.8817. If it breaks its first resistance level at $2.8958, next barrier will be at $2.9192. In case the second key resistance is broken, the industrial metal may attempt to advance to $2.9333.

If the contract manages to breach the S1 level at $2.8583, it will next see support at $2.8442. With this second key support broken, movement to the downside may extend to $2.8208.