The dollar rose as investors backed out of risk positions and prepped themselves for the Federal Reserve's Open Market Committee meeting next week. The central bank is expected to announce an asset-purchasing program – quantitative easing – designed to raise flagging macro-economic demand. The best-case scenario for copper would be a truly massive QE program, which would push down the value of the dollar while (hopefully) priming the economic pump for firmer growth.
On the Chicago Mercantile Exchange, high-grade copper futures for December 2010 delivery lost 4.1 cents to trade at 3.7465 per pound. Longer-term March 2011 futures slipped 4 cents to 3.759 per pound.
In fact, the supply and demand fundamentals underlying "Dr. Copper" suggest that most trading is currently revolving around dollar expectations right now.
"The combination of a potential strike at [the Chilean copper mine] Collahuasi and the launch of copper exchange-traded funds is adding to what is already a bullish outlook for copper," Dan Major, an analyst at RBS Global Banking & Markets in London, told Bloomberg News Friday. "Despite these fundamental factors, dollar strength will likely lead to further copper-price weakness."
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.