SMM Morning Review - 2012/7/4 Copper Market

SHANGHAI, Jul. 4 (SMM) – Investor expectations that China may loosen loan policies continued to boost markets Tuesday. Besides, investors also anticipated the European Central Bank (ECB) and Britain's central bank would announce a cut in their benchmark interest rates at Thursday's meeting. This helped improve market sentiment and caused the US equity markets to surge by 1% continuously and European stock markets to hit a fresh two-month high. Gold prices gained 1.5%, while crude oil prices increased by 4.7%. Coupled with large scale short-covering, LME copper prices rose rapidly, testing resistance at the 60-day moving average several times and climbing to as high as USD 7,823/mt before finally ending at USD 7,784/mt, a rise of USD 151/mt. Nevertheless, LME copper's moving range was approaching overbought territory, with the Relative Strength Index (RSI) rising to above 60 Tuesday. Meanwhile, according to Commodity Futures Trading Commission data, speculators have been building their short positions since mid-May, the largest scale since March 2009, amid heightening pessimism towards the European debt crisis. This means that even if LME copper prices can gain buying support, they are likely to fluctuate in a broad range over the near term.

Markets in the US are closed for the Independence Day holiday Wednesday. Investors will likely cut some positions to avert risks ahead of Thursday's central banks' meeting, despite market optimism. In this context, LME copper will have limited upside room and move between USD 7,700-7,820/mt during Wednesday's Asian trading session. The Shanghai Composite Index will suffer pressure at the 10-day moving average. SHFE copper prices will start slightly higher and then try to stand above the RMB 56,000/mt point, with SHFE 1210 copper contract expected to hover in the RMB 55,800-56,500/mt band. Spot copper discounts are estimated between negative RMB 100-0/mt versus SHFE 1207 copper contract.