Hawkish Fed Outlook & China Concerns Weighing on Copper

Copper Under PressureCopper prices have come under heavy selling pressure on the back of the September FOMC yesterday. With the Fed signalling a ‘higher for longer’ outlook on rates, USD saw fresh buying, weighing on commodities prices into the back end of the week. Copper prices have been fluctuating greatly over recent months as a result of shifting Fed expectations as well as a changeable outlook on China.China WorriesFears over the health of the Chinese economy have been a major headwind for copper prices given the importance of Chinese demand. While economic support measures have helped offset these fears, concerns remain and with USD marching higher once again, the near-term outlook has weakened.  USD Key for Copper DirectionLooking ahead, the path for copper will depend firmly on how USD price action develops. The Fed has signalled its intention to pause tightening after the next hike. However, with fewer rate cuts now seen next year, USD looks likely to remain bid near-term at least. While this remains the case, copper looks vulnerable to further downside. This dynamic will likely be exacerbated on any fresh data weakness out of China.Technical ViewsCopperThe sell off in copper has seen the market moving back down to test the rising trend line from last year’s lows as well as the 3.6745 support level. This is a major support area for the market which, if broken, will be firmly bearish. Below here, the next level for bears to focus on is the 3.3445 level, in line with bearish momentum studies readings.