The Copper Monthly Metals Index (MMI) held flat for this month’s reading.
After the mid-October spike, copper prices have begun to consolidate.
Any bullish technical patterns are at risk of invalidation, as prices appear to trade consistently lower. Additionally, its failure to break out of any bullish structures within smaller time frames suggests a weakness in buyer momentum.
Until the occurrence of a strong rally to continue the long-term uptrend, copper will likely become bearish, as it cannot sustain its breakthroughs of historical resistance levels.
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Fed may accelerate tapering
As inflationary pressures mount, the Federal Reserve may double the pace of its tapering of quantitative easing measures that were put in place at the onset of the pandemic. The Fed had started to reduce bond purchases from $120 billion per month in November on track to be completed by mid-2022.
Recent testimony from Fed Chair Jerome Powell indicated support for increasing tapering efforts, with expectations it may reach $30 billion per month following the upcoming Dec. 14-15 Federal Reserve board meetings.
The Consumer Price Index reached a 30-year high in October, expanding to 6.2%. In a recent blog post, the IMF encouraged such policy revisions, stating, “We see grounds for monetary policy in the United States—with gross domestic product close to pre-pandemic trends, tight labor markets, and now broad-based inflationary pressures—to place greater weight on inflation risks as compared to some other advanced economies including the euro area. It would be appropriate for the Federal Reserve to accelerate the taper of the asset purchases and bring forward the path for policy rate increase.”
Historically, copper prices have a positive correlation with inflation. Efforts to rein in inflation will likely add to bullish sentiment.