US dollar index weakens amid tightening supply, copper prices extend gains overnight [[SMM Copper Morning Comment]]

SMM May 7 News: Overnight, LME copper opened at $9,435/mt, dipping to a low of $9,431/mt shortly after the opening bell. It then fluctuated upward, reaching a high of $9,563/mt near the close, before pulling back slightly to close at $9,520/mt, up 1.75%. Trading volume reached 20,000 lots, and open interest stood at 289,000 lots. The most-traded SHFE copper 2506 contract opened at 77,830 yuan/mt, dipping to a low of 77,770 yuan/mt shortly after the opening bell. It then surged straight up, reaching a high of 78,390 yuan/mt during the session, before consolidating sideways near the close, eventually closing at 78,320 yuan/mt, down 0.84%. Trading volume reached 52,000 lots, and open interest stood at 178,000 lots. On the macro front, the US Department of Commerce reported on Tuesday that the US trade deficit widened by 14% in March to a record $140.5 billion. Coupled with the decline in the yield on 2-year US Treasury bonds and a series of pessimistic corporate outlooks, this has led the market to refocus on the economic pressures that a potential global trade war could bring. The US dollar index fluctuated downward, providing support to copper prices. On the fundamental side, from the supply perspective, downstream pick-up of goods proceeded normally during the Labour Day holiday, but warehouse inflows were limited. Imported cargoes were not replenished as scheduled, leading to tight spot supply and strengthening suppliers' sentiment to hold back cargoes, pushing spot premiums higher. From the demand perspective, although some downstream players made just-in-time procurement in the morning session, overall, downstream purchase willingness was somewhat suppressed in the face of high copper prices, and overall market activity remained moderate. As of May 6, SMM copper inventories in major regions across China decreased by 1,100 mt from before the holiday to 128,500 mt on a WoW basis. Looking ahead, if imported cargoes are gradually replenished or downstream demand continues to be suppressed by high copper prices, changes in both supply and demand may alter the current market landscape. Currently, bullish and bearish factors are intertwined in the market, introducing a degree of uncertainty. It is expected that copper prices will still have some upside room today.