Copper prices fall after Christmas

The U.S. fiscal cliff negotiations have not reached a consensus solution. The negotiations have stalled for several times and repeatedly eroded market confidence. Investors' risk aversion has increased and dragged down copper prices. In the past two days, Europe and the United States have entered Christmas celebrations and negotiations have been temporarily suspended.

Chart: London copper, Shanghai copper charts

U.S. policymakers will return to Washington on December 27th, which is only four days away from the fiscal cliff deadline. After the talks broke down last week, the hope of reaching a preliminary agreement before Christmas had been shattered, which led to speculations in the market. These included: 1. Both parties finally reached an agreement within the deadline. 2. Reached a partial agreement to ease the fiscal cliff. 3. Failed to reach a unanimous proposal and fell on the fiscal cliff. Among these three outcomes, there is a high probability that both parties will eventually compromise each other to reach a partial agreement. Earlier, several lawmakers said that the United States still has hope that it will face the fiscal cliff, but the conclusion of a comprehensive agreement by the end of the year has been "very unlikely" and only small-scale agreements can be reached.

In the past two days, the LME has been closed and the domestic copper market has oscillated. Due to the successive release of 94 project red envelopes by the National Development and Reform Commission, the stock market has been stimulated to rise, and the metal market has followed suit with a slight increase. However, cautious market sentiment still dominates, and copper prices remain within a narrow range and wait for news guidance.

From the trend point of view, the pressure above the copper price is heavier, and the energy index is weakened. Before the “fiscal cliff” problem has no result, the copper price is likely to continue falling. If the United States and the two parties finally reach an agreement in the next few days, it is expected that the possibility of a partial agreement as a transition will increase the wave of copper prices. However, for the copper market lacking fundamental support, the effect is more limited. Copper market is difficult to get rid of the resistance above.