The EUR/JPY pair is one I am watching very closely.
This is mainly due to the fact that the market is approaching a psychologically significant figure in the form of ¥155, and that we have seen quite a bit of noise in that area previously.
The question now will be whether or not the market can form some type of “double bottom”, and of course whether or not the so-called “death cross” comes into the picture and forces people to acknowledge that we might go much lower.
Risk Appetite
The carry trade has been absolutely slaughtered over the last several weeks, and quite frankly I’m a bit surprised at just how far out of control it’s gotten. We’ve seen the Japanese yen strengthen quite drastically, but it is worth noting that there is a Bank of Japan interest rate decision on September 20 that could greatly influence where we go next. After all, the Japanese can talk a tough game, but sooner or later higher interest rates will destroy the Japanese economy. Japan is one of the most indebted economies in the world, so this is like a massive game of chicken that they are playing, and somebody’s about to get ran over.
Having said that, you need risk appetite to come back into the market for this to be a viable long position. The interest rate differential does favor the euro, but I would also point out that we are approaching an area that there could be a bit of a “trapdoor” waiting, meaning that if we break down from here, it could get really ugly, and really quick. The Japanese yen has gained about 12% against the euro from the peak, which of course is a huge move to say the least.
I think the one thing you can count on is a lot of volatility here, and at this point in time it’s a bit like” catching a falling knife.” While I don’t necessarily want to buy the market, I don’t necessarily want to short it either. However, I am willing to have a go with a small position to the upside if we can break above the ¥157.50 level.
International crude oil prices slightly recovered from a 33-month low level and climbed three per cent or over $2 a barrel on Wednesday, September 11, driven by fears of lengthy production shutdowns in the offshore oil patch due to Hurricane Francine. The recovery in prices also came after an increase in US crude inventories reported earlier today, while US inflation eased in August.
Brent crude futures were last up $1.87, or 2.70 per cent, to $71.06 a barrel and the US West Texas Intermediate (WTI) crude futures last gained $2.05, or 3.12 per cent, to $67.80. Back home, crude oil futures last traded 2.91 per cent higher at ₹5,694 per barrel on the multi-commodity exchange (MCX).
What pushed crude oil prices from a three-year low?
-Crude oil prices shook off an increase in crude inventories reported by the US Energy Information Administration (EIA). The EIA said crude inventories rose by 833,000 to 419.1 million barrels in the week ending September 6, lower than analysts’ expectations.
-Analysts said EIA data show Cushing inventories have drawn nine of the last ten weeks, down to the lowest level since early November last year. Concern about Hurricane Francine disrupting output in the US, the world’s biggest producer, also supported prices.
-Both oil benchmarks tanked on Tuesday, with Brent falling below $70 to its lowest price since December 2021 and US crude dropping to its lowest since May 2023 after the Organisation of Petroleum Exporting Countries (OPEC) revised its 2024 oil demand growth forecast for a second time.
-OPEC said in its monthly report that the world oil demand will rise by 2.03 million barrels per day (bpd) in 2024, down from last month’s forecast for growth of 2.11 million bpd. Until last month, OPEC had kept the forecast unchanged since it was first made in July 2023.
-Analysts said the market rebounded autonomously, as Tuesday’s drop was substantial, citing fears that Hurricane Francine would disrupt supply. The US Bureau of Safety and Environmental Enforcement said on Tuesday that about 24 per cent of crude production and 26 per cent of natural gas output in the US Gulf of Mexico were offline due to the storm.
-Oil prices have lately dipped on weakening global demand prospects and expectations of oil oversupply with the Libya deal and group output. The bearish rut comes despite the OPEC alliance postponing its original plan to add 180,000 bpd next month as it gradually restarts output that has been halted since 2022 to shore up prices.
-D-Street analysts expect that global crude oil prices will not remain below $70/bbl marl for long. Morgan Stanley cut its Brent crude oil forecasts for coming quarters and said the global oil market is facing a period of demand weakness similar to those seen during recessions.
Analysts said Chinese demand growth was also revised downwards to 650,000 barrels per day, compared to 700,000 barrels per day in the previous report. A tropical storm in the Gulf of Mexico and a decline in US oil stocks could support crude oil prices at lower levels.
‘’We anticipate continued volatility in crude oil prices. Crude oil is expected to find support at $64.90-64.40, with resistance around $66.20-66.80. In INR terms, crude oil has support at ₹5,450-5,400, while resistance is at ₹5,600-5,660,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
Commenting on crude price forecast, Swarnendu Bhushan, Co-head of Institutional Equities, PL Capital- Prabhudas Lilladher said, ‘’While upstream earnings are currently impacted, with the OPEC+ delaying its planned rise in production, we expect oil prices to rebound to $75-80/bbl in the near term.”
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.
The EUR/GBP pair has captured my attention, as market participants continue to see a lot of volatility in this market.
Ultimately, this is a market that is at extreme lows, and I think that’s part of what’s going on here.
Quite frankly, the market is just so oversold that sooner or later somebody has to close out their short position.
Furthermore, the market is paying close attention to the idea that the GDP in the United Kingdom came in flat, instead of the anticipated 0.2% month over month. This of course is a bit of a surprise, and therefore I think you will see the British pound continue to take it on the chin, at least in the short term. With that being said, we are still in a massive downtrend and of course there will be quite a bit of resistance to rallying in the short term.
Technical Analysis
I think at this point in time, the first thing that traders will be paying close attention to is the 50 Day EMA. This indicator of course is widely followed, and it is just above the candlestick that we are praying for the session. If we can break above the 50 Day EMA, then it’s possible that the market could go looking to the 0.85 level, perhaps even the 0.8530 level, which is roughly where the 200 Day EMA sits.
Underneath, we have the 0.84 level, an area that has been massive support more than once and therefore I think you have to look at it with a certain amount of suspicion as to whether or not we can break down below there. Quite frankly, we would need to see the euro fall apart, and the British pound really start to take off in order for that to happen. I also suspect that it is probably only a matter of time before we get a bigger bounds, especially if we find out that the Bank of England is going to have to start cutting rates aggressively, much like many of the other central banks around the world might be doing.
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During yesterday’s trading session. The US dollar rose after inflation in the United States exceeded expectations in August, as the important core inflation reading of the consumer price index reached 0.3% on a monthly basis, exceeding the consensus expectations of 0.2%.
As a result, the euro against the US dollar EUR/USD collapsed to the support level of 1.1000.
Technically it is the lowest in nearly a month.
Amidst a downward movement, the euro pairs will have an important date today with the European Central Bank announcing an update to its monetary policy decisions.
According to forex trading, the GBP/USD also fell to a three-week low of 1.3000 after the probability of a 50-basis-point US interest rate cut by the Federal Reserve next week fell to 15% from 29% before the US inflation release. The US dollar is trading strongly as the August US inflation report appears to have effectively ruled out the possibility of a significant interest rate cut by the Federal Reserve this month, says Matthew Ryan, analyst at global financial services firm Ebury. However, the US dollar is expected to see limited gains as the rest of the inflation report was a moderate reading. The annual core CPI rate is now approaching the Fed’s target of 2.1% as of August.
According to economic data, the US core CPI increased by 0.2% month-on-month in July, in line with forecaster expectations, as was the case with the annual inflation rate of 2.5%. Meanwhile, core inflation remained unchanged at 3.2% year-on-year. Overall, the inflation trend remains consistent with the Federal Reserve achieving its goal of bringing inflation sustainably to its target level, meaning a US interest rate cut next month is a certainty.
Paul Ashworth, chief North America economist at Capital Economics, said: “Overall, US inflation appears to have been successfully tamed, but with housing inflation refusing to moderate as quickly as hoped, it hasn’t been completely conquered. Under these circumstances, we expect the Fed to adopt a measured approach to cutting interest rates.”
The cushion in US core inflation remains intact, at 0.5% y/y. Moreover, the Fed can live with this as most components of the inflation basket continue to see deflation. Overall, the muted response in the forex market is a testament to the Fed’s declining importance of inflation and the strength of the US dollar may be limited as a result, especially given the proximity of the Fed’s decision last week. Accordingly, according to analysts, “We believe that the US Federal Reserve will strike a dovish tone in its communications after the September meeting, indicating to the markets that the slowdown in the US Labor market has accelerated, and that the pace of aggressive cuts may be required to support it.”
If this is the case, the US dollar may weaken.
EUR/USD Technical analysis and forecast:
According to the performance on the daily chart, the Euro against the US Dollar EUR/USD is in the path of a recently formed downward channel. Technically, the bears’ control over the trend will increase if the currency pair moves towards the support levels of 1.0955 and 1.0880, respectively, and at the latter level, some technical indicators will move towards strong oversold levels. On the other hand, and for the same period of time, the resistance of 1.1200 will remain the most important for the strength of bulls’ control over the currency pair’s direction again. In general, the Euro price will remain subject to signals from the European Central Bank today about the times of interest rate cuts for the remainder of 2024. Decisively, the decision comes before the US Federal Reserve’s announcement next week.
Silver price moves higher towards $29 even though traders pare Fed large rate cut bets.
The US Dollar and bond yields rise as the US CPI data for August shows signs of stickiness.
Investors await the US PPI and the Initial Jobless Claims data.
Silver price (XAG/USD) edges higher towards the crucial resistance of $29.00 in Thursday’s European session. The white metal rises slightly despite investors seem confident that the Federal Reserve (Fed) will start reducing interest rates gradually by 25 basis points (bps) to 5.00%-5.25% this month.
Market speculation for the Fed starting to reduce its key borrowing rates aggressively has diminished significantly as Wednesday’s United States (US) Consumer Price Index (CPI) data for August showed signs of stickiness in inflationary pressures. Annual US core inflation – which excludes volatile food and energy prices – rose in line with estimates and the prior release of 3.2%.
Declining market expectation for Fed interest rate cut by 50 bps has uplifted the US Dollar (USD) and bond yields. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near 101.70. 10-year US Treasury yields rise to 3.67%. Generally, higher yields on interest-bearing assets weigh on the Silver price, given that they increase the opportunity cost of holding an investment in non-yielding assets, such as Silver. But, in this case, the Silver price remains firm.
Going forward, investors will focus on the US Producer Price Index (PPI) data for August, which will be published at 12:30 GMT. The core PPI is estimated to have accelerated further. At the same time, investors will also focus on the US Initial Jobless Claims data for the week ending September 6.
The significance of the jobless claims data has increased in last few weeks as recent comments from a string of Fed officials signal that the central bank has become more concerned over preventing job losses.
Silver technical analysis
Silver price trades in a limited range of $27.70-$29.20 from more than a week. The upside in the white metal remains restricted by the 200-period Exponential Moving Average (EMA), which trades around $28.80.
The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, exhibiting a sideways trend.
Silver four-hour chart
(This story was corrected on September 12 at 11:30 GMT to say that Silver price trades in a limited range of $27.70-$29.20, not $27.70-$28.20.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
GBP/USD stabilizes near 1.3050 in the European session on Thursday.
The near-term technical picture suggests that the bearish outlook remains unchanged.
The US economic calendar will offer mid-tier macroeconomic data.
GBP/USD lost its traction in the early American session on Wednesday and dropped to its lowest level since August 20 near 1.3000 before staging a modest rebound on improving risk mood later in the day. The pair holds steady at around 1.3050 in the European session on Thursday.
British Pound PRICE This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the weakest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.60%
0.56%
0.27%
0.06%
-0.10%
0.64%
1.18%
EUR
-0.60%
-0.10%
-0.28%
-0.55%
-0.74%
0.06%
0.58%
GBP
-0.56%
0.10%
-1.44%
-0.45%
-0.65%
0.14%
0.66%
JPY
-0.27%
0.28%
1.44%
-0.25%
-0.37%
0.35%
1.08%
CAD
-0.06%
0.55%
0.45%
0.25%
-0.10%
0.58%
1.30%
AUD
0.10%
0.74%
0.65%
0.37%
0.10%
0.79%
1.29%
NZD
-0.64%
-0.06%
-0.14%
-0.35%
-0.58%
-0.79%
0.53%
CHF
-1.18%
-0.58%
-0.66%
-1.08%
-1.30%
-1.29%
-0.53%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Following a bearish start to the day, the US Dollar (USD) gathered strength following the August inflation report on Wednesday. The US Bureau of Labor Statistics reported that annual inflation, as measured by the change in the Consumer Price Index (CPI), softened to 2.5% in August from 2.9% in July. However, the core CPI, which excludes volatile food and energy prices, increased 0.3% on a monthly basis, coming in above the market expectation of 0.2%.
The US economic docket will feature weekly Initial Jobless Claims and the August Producer Price Index (PPI) data on Thursday. The CME FedWatch Tool shows that markets are currently pricing in a less than 15% probability of a 50 basis points rate cut. The market positioning suggests that the USD doesn’t have a lot of room left on the upside. In case there is a significant increase in the number of first-time applications for unemployment benefits, the immediate reaction could hurt the USD.
Meanwhile, US stock index futures trade modestly higher on the day. A bullish opening in Wall Street could make it difficult for the USD to preserve its strength and allow GBP/USD to gather recovery momentum.
GBP/USD Technical Analysis
The relative Strength Index (RSI) indicator on the 4-hour chart recovers but remains below 50. Additionally, GBP/USD is yet to make a 4-hour close above the 20-period Simple Moving Average (SMA), reflecting a lack of buyer interest.
On the downside, 1.3000 (static level, psychological level) aligns as first support before 1.2970 (Fibonacci 50% retracement of the latest uptrend, 200-period SMA) and 1.2900 (Fibonacci 61.8% retracement). In case GBP/USD continues to use 1.3040 (Fibonacci 38.2% retracement) as support, 1.3100 (static level) could be seen as next resistance ahead of 1.3130 (50-period SMA, 100-period SMA).
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Gold price turns positive while above $2,500, as US PPI and Jobless Claims data loom.
The US Dollar holds rebound alongside Treasury bond yields on fading outsized Fed rate cut bets.
Gold price appears primed for a range breakout, with buyers still hopeful amid a bullish RSI.
Gold price is making a minor recovery attempt early Thursday, as buyers stay hopeful above $2,500. With the US Consumer Price Index (CPI) data out of the way, the focus now turns toward the US Producers Price Index (PPI) and Jobless Claims data for fresh trading incentives.
Gold price looks to US PPI data for fresh impetus
Gold traders bide time and assess the critical US CPI inflation data released on Wednesday, which poured cold water on increased bets of an outsized interest rate cut by the US Federal Reserve (Fed) interest rate cut next week.
Data published by the US Bureau of Labour Statics (BLS) showed Wednesday that the CPI rose 0.2% MoM in August, aligning with the expected 0.2% print. US August core CPI jumped 0.3% MoM vs. estimates of 0.2%. The headline annual CPI inflation ticked a tad lower to 2.5% in August while the core CPI grew 3.2% YoY versus forecasts of 3.2%.
Despite the headline annual CPI figure cooling off, the sticky monthly and yearly core figures prompted markets to rule out an outsized Fed rate cut this month. Markets are currently pricing in an 85% chance of a 25 basis points (bps) cut, compared to 71% before the data, the CME Group’s FedWatch tool shows.
Gold price tested the key $2,530 topside barrier before witnessing a steep decline on the sticky US inflation data, which triggered a fresh recovery rally in the US Dollar (USD) and the US Treasury bond yields.
Despite the pullback, Gold price managed to defend the critical short-term support level near $2,505, keeping it in its three-week-long consolidative range.
In Thursday’s trading so far, Gold buyers seem to have fought back control but lack bullish conviction amid persistent US Dollar strength and an upbeat market mood. However, Gold price could draw support from gains in other precious metals and industrial metals, including Palladium, Nickel, etc, in the face of potential export curbs under consideration from Russia.
Also, traders look to a fresh batch of top-tier US economic data due later on Thursday for further hints on the Fed’s policy, eventually impacting the value of the US Dollar and Gold price.
Gold price technical analysis: Daily chart
Nothing seems to have changed for Gold price from a short-term technical perspective. Buyers continue to stay hopeful as Gold price manages to yield daily closings above the 21-day Simple Moving Average (SMA), now at $2,505.
The 14-day Relative Strength Index (RSI) has turned flat but still holds firm above the 50 level, backing the case for the bullish potential.
Gold buyers yearn for a sustained breakthrough the record high of $2,532, above which the $2,550 psychological level will come into play.
If Gold price faces rejection once again near the $2,530 supply zone, a correction would ensue, with a daily closing below the 21-day SMA at $2,503 needed to negate the bullish outlook in the near term.
A breach of the latter will challenge the previous week’s low of $2,472, followed by the symmetrical triangle resistance-turned-support at $2,462.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
The GBP/USD pair is trading at $1.30448, up a modest 0.03%. The pivot point sits at $1.3049, serving as a critical level to watch. Immediate resistance is at $1.3104, with further levels at $1.3143 and $1.3189.
On the downside, key support is found at $1.3013, followed by $1.2975 and $1.2942. The 50-day and 200-day Exponential Moving Averages (EMA) both sit at $1.3085, indicating a critical resistance zone.
If the price remains above $1.3049, the trend holds a bullish bias, but a break below this level could trigger a sharp decline. Keep an eye on the $1.3049 level for short-term direction, as it will dictate near-term momentum.
Euro Slips as ECB Rate Decision Looms Amid Weak German Data
For Euro (EUR), the German WPI m/m dropped by -0.8%, significantly missing the forecast of 0.1%, signaling weakening inflationary pressures. Additionally, Italy’s unemployment rate fell slightly to 7.1%, offering some respite to the Eurozone outlook.
However, the key focus is now on the European Central Bank (ECB), which is expected to cut the Main Refinancing Rate to 3.65% vs. 4.25%. The ECB press conference later today will be crucial for setting the tone on future monetary policy, with traders closely watching for signs of further tightening or dovish shifts.
The red-hot copper rally has cooled off in recent weeks, with pricespulling back from their May all-time high to close below $9,000/t. Just like in the oil markets, sentiment in copper markets has weakened, driven by weak U.S. manufacturing and labor market data, soft China data, and a sizable build in LME inventories.
Last week, Goldman Sachs downgraded its copper price forecast, due to weakening demand from China. GS now sees copper prices averaging $10,100 per metric ton in 2025, a sharp reduction from its previous forecast of $15,000. Further, Australian mining giant BHP Group (NYSE:BHP) recently downgraded its forecast for China’s copper demand amid concerns about the country’s economic recovery.
Thankfully for the bulls, the long-term copper outlook remains robust. A couple of months ago, Swiss multinational commodity trading company Trafigura predicted that EVs, Artificial Intelligence (AI), power infrastructure, and automation boom will drive at least 10 million metric tons of additional copper demand by 2035, According to Graeme Train, Trafigura’s head of metals analysis, one third of the 10 million tons of new demand will come from the electric vehicle sector, “A third is electricity generation, transmission and distribution, and the rest is for things like automation, manufacturing capex and cooling systems within data centers,” he said.
Saad Rahim, Trafigura’s chief economist, has projected that AI alone has the potential to add one million tonnes per annum of copper demand by 2030.
Jeff Currie, Chief Strategy Officer at The Carlyle Group and former Global Head of Commodities Research at Goldman Sachs, has declared that copper is the new oil and the best trade he has seen in his career. The analyst has pointed out that copper has long been touted as a big winner from the world’s drive towards electrification including electric vehicles and huge grid upgrades. At the same time, Currie notes that it takes years for new copper mining capacity to actually come onstream. However, copper prices have, unexpectedly, pulled back sharply several times over the past two years. Currie says this has created a mismatch between short-term prices and long-term supply, making copper his highest-conviction trade ever.
Meanwhile, a recent study, published by the International Energy Forum (IEF) says the EV revolution alone will drive enough copper demand to outstrip supply in the next couple of decades. According to IEF, current projections show that copper production will increase 82% to hit a massive 37.1 million tonnes by 2050; however, supply will need to increase by an extra 55% to power an all-EV global fleet– equating to the establishment of 194 new mines or six each year till 2050. With an estimated 6.66bn tonnes of global copper resources identified, copper scarcity is not the main issue here, rather than the fact that it takes ~23 years to turn a copper discovery into a functioning mine. The lengthy development time suggests the world is facing a near-impossible task to develop enough mines to meet demand in the available timeframe.
Source: Mining.com
The report, however, notes that if copper recycling remains constant at its 2018 level rather than increasing as assumed, 43 new mines will need to come online every year, with the copper demand gap clocking in at 8.1 million tonnes in 2035 and 9.6 million tonnes in 2040.
It is worth noting that the study used the same methods to arrive at this dire picture as the one used by American geologist M. King Hubbert to accurately predict 30 years of U.S. oil production. However, Hubbert’s model broke when technologies such as hydraulic fracturing, directional drilling and Enhanced Oil Recovery (EOR) made it possible to produce natural gas and crude oil from shale and expanded the hydrocarbon resource. This offers the world a narrow window to expedite the process of bringing new copper mines online.
Hybrids A Potential Solution
IEF has also offered another way to ditch efforts to replace fossil fuel-powered vehicles with all-electric vehicles and instead replace them with hybrids.
“There is remarkably little difference between the amount of copper needed to manufacture hybrid electric rather than ICE vehicles,” with the researchers pointing out that hybrid electric vehicles require 29 kg of copper compared to 24 kg for an ICE (internal combustible engine) vehicle. “It would therefore be judicious to aim for a transition to the 100% manufacture of hybrid electric vehicles by 2035, rather than transitioning to the 100% manufacture of battery electric vehicles, which require 60 kg. The copper required for this transition is only slightly above baseline and does not require major grid improvements,” the report’s authors said.
Fossil fuel investors will no doubt be pleased to know that hybrids remain incredibly popular in this age where pure EVs have become dominant, a full 25 years since Toyota Motor Corp. (NYSE:TM) launched the Prius. Nearly 3 million hybrid EVs were sold in 2022, good for nearly 30% of all EVs sold. Hybrids remain popular because they make considerable savings on gas and cut their carbon footprint without the attendant charging anxiety that comes with pure EVs.
In a hybrid car, there is an ICE component and an electric motor, with battery-stored energy. However, a hybrid can’t be plugged in to charge. Instead, it is charged by the regenerative braking of the internal combustion engine. The extra power provided by the electric motor can potentially allow for a smaller engine, adding some environmental benefits. The battery can also power auxiliary loads and reduce engine idling when stopped, according to the Alternative Fuels Data Center.
Once a bottom is satisfied with an upside breakout, plus a daily close above the signal price level, the trend should be ready to progress. Higher, being the more likely direction given the confirmation of the double bottom breakout that defines a bullish trend reversal, from down to up. When measuring the pattern and projecting forward a potential target of 2.72 is suggested. The 61.8% Fibonacci retracement is just below that level at 2.67. Together, they point to a range of potential resistance from 2.67 to 2.72.
Higher Target Starts at 2.89
A higher possible target is identified up around the downtrend line. It converges with a price zone around the 78.6% retracement at 2.89 and a previous interim swing high at 2.92. Natural gas is progressing inside a large symmetrical triangle pattern. The advance off the second bottom recently confirms the pattern.
It also strengthens the possibility of an eventual test of resistance at the top of the triangle. Once the bottom of a swing within the pattern is reversed, there is the potential to test the other side of the pattern to see if resistance is retained or determine when a bullish breakout may be occurring.
Strength Seen Relative to 200-Day MA
One bullish feature of the trend is that today’s session is likely to end with the price of natural gas closing back above the 200-Day MA, after falling below the 200-Day line for the prior couple of days. This type of price behavior shows strength. Nevertheless, the market will be watching for another advance above 2.30, followed by a daily close above that level.
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