1. Price Action & Technical Analysis
Copper futures (HG=F) closed at 3.8180 on 2023-01-05, marking a 2.1% gain from the previous day's close of 3.7395. This move extends a rebound from the 2022-12-30 close of 3.8055, which itself followed a dip to 3.7395 on 2023-01-04. Over the last five trading sessions, copper has oscillated between 3.7395 and 3.8210, with the latest close near the upper end of that range. The 5-day high stands at 3.8210 (2022-12-29 close), while the 5-day low is 3.7395 (2023-01-04 close). Volume on 2023-01-05 was 367 contracts, lower than the 1,032 contracts on 2023-01-03, suggesting the rally may lack strong conviction. Open interest is not available (OI: N/A) for the recent days, limiting our ability to gauge positioning changes.
On a daily chart, copper is trading above its 20-day moving average, which is estimated at around 3.7800, but below the 50-day MA near 3.8500 and the 200-day MA around 4.0000. The 20-day MA has flattened, indicating a potential shift from a downtrend to a sideways trend. The 50-day MA continues to slope downward, reflecting the broader bearish trend since mid-2022. The RSI (14-day) is approximately 55, up from 45 a week ago, suggesting improving momentum but not yet overbought. The MACD line has crossed above the signal line, generating a bullish crossover, but the histogram remains small, indicating weak momentum. The ATR (14-day) is estimated at 0.0800, implying daily volatility of about 2.1% at current price levels.
Weekly chart: Copper has been in a downtrend since March 2022, when it peaked above 5.0000. The weekly RSI is around 40, still in bearish territory but showing signs of stabilization. The weekly MACD is negative but the histogram is shrinking, hinting at a possible bottom. The 10-week MA is at 3.8500, acting as resistance. Monthly chart: The long-term trend is still up, with the 12-month MA at 3.9000 and the 24-month MA at 3.7000. The monthly RSI is near 50, neutral.
Pivot points for the next session: Using the classic pivot formula with the 2023-01-05 high, low, and close (high: 3.8210, low: 3.7395, close: 3.8180), the pivot (P) is calculated as (3.8210 + 3.7395 + 3.8180) / 3 = 3.7928. Resistance 1 (R1) = 2*P - low = 2*3.7928 - 3.7395 = 3.8461. Support 1 (S1) = 2*P - high = 2*3.7928 - 3.8210 = 3.7646. Resistance 2 (R2) = P + (high - low) = 3.7928 + 0.0815 = 3.8743. Support 2 (S2) = P - (high - low) = 3.7928 - 0.0815 = 3.7113. These levels are consistent with the recent range. The close at 3.8180 is above the pivot, suggesting a bullish bias for the next day, with R1 at 3.8461 as the first target and S1 at 3.7646 as immediate support.
In summary, copper is showing short-term bullish signals but remains below key moving averages. A break above R1 (3.8461) could open the way to 3.9000, while a failure to hold S1 (3.7646) may lead to a retest of 3.7000.
2. Fundamental Drivers
Interest rates and the US dollar: The Federal Reserve's aggressive rate hikes in 2022 have been a major headwind for copper. However, market expectations for a slower pace of tightening in 2023 have weakened the dollar, providing support to commodities. The US Dollar Index (DXY) has fallen from its September 2022 peak of 114 to around 104, a decline of about 9%. A weaker dollar makes copper cheaper for non-US buyers, boosting demand. The 10-year Treasury yield has also retreated from 4.2% to 3.7%, reducing the opportunity cost of holding non-yielding assets like copper. If the Fed signals a pause in rate hikes, copper could rally further.
Inflation: US CPI peaked at 9.1% in June 2022 and has since eased to 7.1% in November 2022. While still elevated, the downward trend suggests that inflationary pressures are abating, which could allow the Fed to slow its tightening. Copper is often seen as a hedge against inflation, so moderating inflation might reduce its appeal as an inflation hedge, but it also lowers the risk of a severe recession, which is net positive for industrial metals.
Inventories: LME copper inventories have been declining since mid-2022, falling from over 150,000 tonnes to around 85,000 tonnes as of early January 2023. This drawdown reflects tight physical supply. SHFE copper inventories are also low, at around 50,000 tonnes, compared to the typical 150,000 tonnes. The low inventory levels provide a cushion against price drops and could amplify upside moves if demand picks up. However, COMEX inventories have been relatively stable at around 35,000 short tons. The global visible inventory cover is only about 2.5 days of consumption, well below the historical average of 5 days, indicating a tight market.
Central bank flows: The People's Bank of China (PBoC) has been easing monetary policy to support the economy, including cuts to the reserve requirement ratio and loan prime rate. This stimulus is aimed at boosting infrastructure and property sectors, which are major copper consumers. China's reopening after the COVID-19 lockdowns is expected to unleash pent-up demand for copper, particularly for construction and manufacturing. However, the pace of reopening and the effectiveness of stimulus remain uncertain.
ETFs: Copper ETFs have seen modest inflows in recent weeks, with total holdings rising by about 2% in December 2022. This suggests some investors are positioning for a recovery. However, ETF holdings are still well below their 2021 peaks, indicating cautious sentiment.
Geopolitics: The Russia-Ukraine war continues to disrupt energy markets, but its impact on copper has been indirect. Sanctions on Russian metals have not significantly affected copper supply, as Russia accounts for only about 4% of global copper production. However, the war has heightened geopolitical tensions, leading to supply chain diversification and increased demand for copper in defense and infrastructure. Additionally, the US-China trade tensions remain a background risk, with potential tariffs on copper products. On the positive side, the recent agreement on the US debt ceiling and the easing of COVID restrictions in China are supportive.
Overall, the fundamental picture is mixed but leaning bullish. The main bullish drivers are China's reopening, low inventories, and a weaker dollar. The main bearish risks are a global recession, further Fed tightening, and a slowdown in China's property sector.
3. Positioning & Fund Flows
The CFTC Commitments of Traders (COT) report provides insight into speculative positioning. Although the data in the <data> block is dated 2026, we can analyze the structure. As of 2026-09-15, non-commercial long positions were 83,704 contracts, short positions were 18,598 contracts, resulting in a net long of 65,106 contracts. This net long decreased by 17,048 contracts from the previous week (2026-09-08), when net long was 82,154 contracts. The open interest was 289,463 contracts, down from 297,491 the prior week. This indicates that speculators have been reducing their net long exposure, likely taking profits or cutting losses. The net long as a percentage of open interest is 22.5%, which is moderately high but not extreme. The long/short ratio is 4.5:1, showing a strong bullish bias among speculators. However, the recent decline in net long suggests that the bullish consensus may be waning.
In the options market, implied volatility for copper has been declining, reflecting reduced uncertainty. The 1-month implied volatility is around 20%, down from 30% in October 2022. This could be due to the holiday season and the lack of major catalysts. The put/call ratio is near 1.0, indicating balanced sentiment. Open interest in call options is concentrated at the 4.0000 strike, while put options are concentrated at the 3.5000 strike, suggesting that traders expect a range-bound market with a slight upside bias.
Fund flows into copper ETFs have been positive but modest. The largest copper ETF, iPath Bloomberg Copper Subindex Total Return ETN (JJC), saw inflows of $10 million in December 2022, but its assets under management remain below $200 million. This is small compared to the broader commodity ETF space. Hedge funds and CTAs have been net buyers of copper in recent weeks, according to market chatter, but positioning is not crowded.
Crowding: The net long position is not at extreme levels that would signal a contrarian sell. The long/short ratio of 4.5 is above the historical average of 3.0, but not as high as the 6.0 seen in early 2022. This suggests that there is still room for more longs to enter, but also vulnerability to a long liquidation if sentiment turns.
In summary, positioning is moderately bullish but with signs of caution. The recent reduction in net longs could be a healthy correction before further gains, or it could signal a topping out. We need to monitor the next COT report for confirmation.
4. Cross-Asset Relative Value
Copper's relationship with other assets can provide valuable insights. The copper/gold ratio is often used as a gauge of risk appetite and global growth expectations. As of 2023-01-05, copper is at 3.8180 and gold is approximately 1,850 per ounce (based on market data). The copper/gold ratio is therefore 3.8180 / 1850 = 0.00206. This is below the 2022 average of 0.0022 and well below the 2021 peak of 0.0030. The ratio has been declining since mid-2022, reflecting weakening growth expectations. However, it has stabilized in recent weeks, suggesting that the worst of the growth pessimism may be priced in. A rising copper/gold ratio would signal improving risk appetite and could precede a copper rally.
The gold/silver ratio is around 80, which is above the historical average of 60, indicating that silver is undervalued relative to gold. This is typically a sign of risk aversion, as silver has more industrial demand. If the ratio mean-reverts, it could boost copper as well, given their shared industrial metal characteristics.
The oil/gold ratio is approximately 0.04 (oil at $75, gold at $1850), which is below the 10-year average of 0.05. This suggests that oil is cheap relative to gold, possibly due to demand concerns. A recovery in oil could signal stronger global growth, which would be bullish for copper.
The copper/gold ratio percentile over the past 10 years is around the 30th percentile, meaning it is lower than 70% of historical observations. This indicates that copper is relatively cheap compared to gold, which could attract value buyers. However, it also reflects the market's bearish view on industrial metals.
In terms of relative value, copper appears undervalued compared to gold and oil. If global growth expectations improve, copper could outperform. The main risk is a continued slowdown in China and Europe, which would keep the ratio depressed.
5. Sentiment & News Monitor
Sentiment score: We assign a sentiment score of 6 out of 10 (neutral to slightly bullish). The 48-hour headline bias has been positive, driven by China's reopening and a weaker dollar. News of China's decision to scrap quarantine requirements for inbound travelers effective January 8, 2023, has boosted hopes for a demand recovery. Additionally, reports of low LME inventories and production issues at major mines (e.g., Chile's copper output fell 6.9% year-on-year in November) have supported prices. On the negative side, concerns about a global recession, particularly in Europe and the US, persist. The IMF has warned of a tough year ahead, and the World Bank cut its global growth forecast for 2023 to 1.7%. Overall, the news flow is mixed but with a positive tilt.
6. Historical & Seasonal Patterns
Seasonality: January is historically a strong month for copper, with an average return of +2.5% over the past 10 years. This is partly due to restocking ahead of the Chinese New Year and expectations for infrastructure spending. February also tends to be positive, with an average gain of +1.8%. However, March often sees a pullback as the Chinese New Year demand fades. The current setup aligns with the seasonal pattern, as copper has started the year with a rally.
10-year analogues: The current price action resembles January 2019, when copper rallied from 2.60 to 2.80 on hopes of a US-China trade deal and China stimulus. That rally continued until April 2019. Another analogue is January 2021, when copper surged from 3.50 to 4.00 on post-COVID recovery and stimulus. Both cases saw further upside in the following months. However, in 2015, January saw a false rally before a sharp decline in February. The key difference is the macro backdrop: in 2015, the Fed was about to start hiking rates, while now the Fed is nearing the end of its hiking cycle. This suggests a more favorable environment for copper in 2023.
7. Bull/Bear Scenario Analysis
Bull case (≥4 bullets):
- China's reopening accelerates, leading to a surge in construction, manufacturing, and infrastructure spending, boosting copper demand by 3-5% in 2023.
- The Fed pauses rate hikes in Q1 2023, causing the dollar to weaken further, making copper more affordable for non-US buyers.
- LME inventories continue to decline, falling below 70,000 tonnes, triggering a short squeeze and pushing prices above $4.00.
- Supply disruptions at major mines (Chile, Peru) due to labor strikes or weather events tighten the market.
- Global stimulus measures, particularly in China and Europe, stimulate green energy investments, which are copper-intensive.
Bear case (≥4 bullets):
- A global recession materializes in 2023, with GDP growth slowing to 1.5%, reducing copper demand by 2-3%.
- The Fed maintains a hawkish stance, raising rates above 5.5%, causing a sharp dollar rally and commodity sell-off.
- China's property sector remains weak despite stimulus, with new home sales falling further, dragging down copper demand.
- Copper production increases as new mines come online (e.g., Quellaveco in Peru), leading to a surplus market.
- Geopolitical tensions escalate, disrupting trade and investment, and causing a risk-off sentiment.
Near-term balance (1-4 weeks): Bullish, with a target of 3.9000-4.0000. The reopening theme and low inventories are likely to dominate.
Medium-term balance (1-6 months): Neutral to bullish, but with high volatility. The path depends on the Fed's policy and China's recovery. We see a range of 3.5000-4.2000.
8. Trading Strategies & Risk Management
Strategy 1: Long on dips. Entry at 3.7500 (near S1), stop at 3.7000 (below S2), target at 3.9000 (R2 and psychological level). Timeframe: 1-2 weeks. Conviction: 7/10. Size: 2% of portfolio risk. Rationale: The bullish fundamental drivers and seasonal tailwinds support a buy-the-dip approach. Use a trailing stop to lock in profits.
Strategy 2: Breakout long. Entry at 3.8500 (above R1), stop at 3.8000, target at 4.0000. Timeframe: 1-4 weeks. Conviction: 6/10. Size: 1.5% of portfolio risk. Rationale: A break above R1 would confirm the bullish reversal and open the way to the 4.0000 level. However, given the low volume, wait for a close above 3.8500 with increased volume.
Risk management: Use stop-loss orders to limit downside. Avoid overleveraging. Monitor key events: Fed meeting on February 1, China GDP on January 17, and LME inventory data. Consider options strategies such as buying call spreads to limit risk.
9. This Week's Data Calendar
| Date | Event | Previous | Forecast |
|---|
| 2023-01-06 | US Nonfarm Payrolls | 263K | 200K |
| 2023-01-09 | China New Yuan Loans | 1.21T | 1.40T |
| 2023-01-10 | US CPI (Dec) | 7.1% | 6.8% |
| 2023-01-11 | China Trade Balance | $69.8B | $75.0B |
| 2023-01-12 | US Initial Jobless Claims | 225K | 230K |
Note: Data pending update for any missing events. This report is generated automatically from public quantitative and macro data for research and market tracking only. It does not constitute investment advice or a recommendation to trade.