Weakening upward momentum Shanghai copper's short-term rise is limited

For now, the upside is overdrawn
.
Chilean copper miners' strike has not been properly resolved, and there is even the possibility of conflict, which has led the market to expect lower copper production in the future, which is supported by a 12% year-on-year decline in Chilean copper output in February
.
Another important mine that worries about limited output is the Grasberg Copper Mine
, the world's second-largest copper mine owned by Indonesia's Freeport.
However, the reduction in output did not trigger the rapid rise of copper prices, but high oscillation, the rapid rise of copper prices in the early stage, in addition to fundamental factors, more is driven by speculative funds, in the case of speculative funds gradually leaving the market, the basic face of the impact of copper prices has been overdrafted, the recent upside is limited, once the favorable news is released, copper prices will appear a large correction
.

On the supply and demand side, domestic copper demand has increased by a limited
margin.
Although the data of copper companies in February was less than expected, March was the traditional consumption season, and the market expectation was more optimistic
.
The operating rate of copper enterprises in February was not satisfactory, mainly due to the delay in returning downstream orders of large and medium-sized enterprises after the Spring Festival, merchants generally started work late, and copper prices rose sharply in mid-February, resulting in a negative attitude towards their output, so the start of work was limited
.
After entering March, the copper industry will usher in the expected peak season, downstream cable consumption will slowly recover, the operating rate will gradually increase, and the overall start of cable enterprises in March is considerable
.
50% of global copper demand depends on China, so changes in China's copper consumption demand have a greater impact
on global copper prices.
China's economic development is still facing greater downward pressure, which has a limited boost to commodities, copper demand will continue to increase, but the increase is limited, and the impact on copper prices is cautiously optimistic
.

On the news front, expectations of a Fed rate hike have heated up
.
Recently, a number of Fed officials have expressed support for raising interest rates at the March meeting, including Fed Chair Janet Yellen and Vice Chairman Fisher Fisher
.
We believe that the market has basically reached a consensus on the Fed's interest rate hike in March, and the Fed may raise interest rates 3-4 times this year, that is, the Fed enters the interest rate hike cycle
.
According to the Fed's interest rate hike cycle and changes in the dollar index, the dollar index still has more room to rise, which has a greater suppression
of copper prices.

As the possibility of the Fed raising interest rates increases, the exchange rates of various currencies, including the RMB, will face certain depreciation pressure, and once the Fed raises interest rates in March, the RMB will come under pressure
.
In fact, since the beginning of this year, under the expectation of uninterrupted interest rate hikes by the Federal Reserve, the RMB has maintained a stable trend
.
In the long run, the probability of the RMB breaking 7 against the US dollar is very low
.
In terms of fundamentals, there is still strong support for the RMB to remain basically stable at a reasonable and balanced level, including China's medium-high economic growth, current account surplus, deepening supply-side structural reform, sufficient foreign exchange reserves and prudent and neutral monetary policy
.
The stability of the RMB exchange rate is conducive to the stability of domestic copper prices
.

Comprehensive analysis, although copper supply is expected to decrease, demand moderately increased, but copper price upward momentum is significantly weakened, the early sharp rise overdraft copper price upside, unless there is greater positive news, can lead to copper prices to open a new round of rise
.
Under the condition that the Fed basically reached a consensus on raising interest rates, the expected decline in the RMB exchange rate is limited, and copper prices are more likely to fall back
.