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Pro: Here’s What’s Really Driving Copper

Chris Ratcliffe | Bloomberg | Getty Images

What's really driving copper?

We spend a lot of time dissecting the global supply and demand equation is order to explain copper's moves. I'm beginning to believe that this is wasted time, and what we should do instead is focus on the Japanese yen.

It doesn't seem a coincidence that copper (and gold and silver for that matter) found a floor days after the Japanese yen found its floor against the dollar, and then copper and the yen began rallying in tandem.This suggests that dollar strength is still a primary driver of commodity prices, and once that strength declines, copper should rally along with the yen. As a secondary driver, China will release the manufacturing managers' index number tonight, and I believe that the market may have been too pessimistic on its China outlook.

If July copper rises above this morning's highs and trades $3.250, that will be the signal of strength, and would lead me to adopt a bullish bias with an objective of $3.440. A trade below $3.150 will stop me out of the trade. If the June Japanese yen futures trade below 100, that would also change my opinion about copper.

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