METALS: Copper - Trades Heavy, Positioning Still Looks A Problem
The range overnight for the HGU5 contract was 437.25 - 447.10, Asia is currently trading around 439.70, +0.30%. Copper has found a base around 435.00 and is consolidating after the huge move lower resulting from the Trump administrations move to differentiate between refined metal and semi-processed products when applying tariffs. The market has been caught wrongfooted and the lack of a decent bounce after such a huge move as well as news of the closure of 1 of Chile's biggest copper mines highlights the positioning issue. Any bounce back to 465 -480 should find sellers initially.
- The LME cash market closed overnight around 9571.18.
- (Bloomberg) - “Codelco halted processing plants at its biggest copper mine in Chile after a deadly tunnel collapse on July 31. The shutdown will reduce output of the metal by about 30,000 metric tons a month, a quarter of Codelco’s production.”
- “Trump’s first wave of copper tariffs will hit imports valued at more than $15 billion last year, highlighting the potential inflationary impact on American manufacturers.”
Fig 1 : Copper(HGU5) Hourly Chart
Source: MNI - Market News/Bloomberg
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FOREX: JPY Crosses - JPY Underperformance Stalls As Risk Eyes Tariff Deadline
This morning has seen US futures open a little higher but still off the highs from last week, ESU5 -0.40%, NQU5 -0.50%. This week the tariff deadline will be closely watched by a market that looks to have a lot of positives already baked in the price. The JPY is bouncing back in the crosses as risk appetite dwindles as the deadline approaches.
- EUR/JPY - Friday night range 169.85 - 170.33, Asia is trading around 170.15. The pair failed to build any upward momentum through 170.00 on Friday. With risk stalling and the JPY beginning to outperform we could see some reversion back towards the 168.50 area.
- GBP/JPY - Friday night 196.91 - 197.41, Asia trades around 197.00. The pair bounced strongly off its support around 196.00, with risk stalling the market will be watching to see if this demand is still around if we dip back down there.
- NZD/JPY - Friday night range 87.45 - 87.70, Asia is currently dealing 87.20. NZD/JPY had a false break above 88.00 and has turned quickly back lower. With risk stalling the danger is this pair drifts back to test its support around 86.00.
- CNH/JPY - Friday night range 20.1322 - 20.1799 Asia is currently trading around 20.1625. A big reversal from the 20.50/20.60 resistance area. In the middle of its recent range awaiting clearer direction with a bias to sell rallies.
Fig 1 : NZD/JPY Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
RBNZ: RBNZ's Conway To Give Speech On July 24
RBNZ Chief Economist Paul Conway will give a speech on July 24, looking at the economic impacts of tariffs on New Zealand.
Via RBNZ: "Reserve Bank of New Zealand Chief Economist Paul Conway will give a speech about global tariffs on Thursday, 24 July covering:
- The various ways global tariffs will impact us here in New Zealand; and How the RBNZ is thinking through the impacts on inflation and the economy more broadly.
- The speech will be published on the RBNZ website at the time of delivery. Mr Conway will deliver the speech at a Business NZ event, hosted by Buddle Findlay in Wellington. The speech is not being livestreamed, however a video recording of the speech will be made available as soon as practicable on the RBNZ YouTube site."
USD: BBDXY - Consolidates Below 1200
The BBDXY range Friday night was 1188.94 - 1191.05, Asia is currently trading around 1190. The BBDXY consolidated in a tight range around 1190. The price action is particularly poor given the surge in US yields and a market that is supposedly extremely short. The USD has opened pretty flat in the Asian session, -0.01%. The larger picture remains one of USD weakness and in the current environment rallies should continue to be met with supply, first resistance is back towards the 1205/1215 area.
- Chen Zhao of Alpine Macro on LinkedIn: “Historically, the only sustained period during which international equities outperformed U.S. stocks was from 2002 to 2007. But crucially, that outperformance was driven entirely by a sharp decline in the U.S. dollar.”
- “Take European equities as an example: when measured in local currency terms, the price return of the European equity index was identical to the S&P 500 Index over that period. Thus, the underperformance of U.S. equities was entirely attributable to a 40% drop in the dollar/euro exchange rate.”
- “Therefore, the decision to overweight or underweight international equities relative to U.S. stocks is, at its core, a currency call. This brings us to the key question today: with the DXY already down 11% this year and bearish sentiment on the dollar now the consensus, do you really want to double down on that view?”
- (Bloomberg) - Dollar bears looking for encouragement would’ve pricked up their ears at some of the comments from Treasury Secretary Scott Bessent on Bloomberg TV Thursday. “The price of the dollar has nothing to do with a strong dollar policy,” he said. “The strong dollar policy is, are we doing the things over the long term to ensure that the US dollar remains the reserve currency of the world.”
- There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.
- Data/Events : NFP, S&P Global Services PMI, ISM Services Index, Factory Orders, Durable Good Orders
Fig 1: BBDXY Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
