Chicago 25/04/2016 - Copper futures edged lower Monday afternoon amid a technical drawdown ahead of the US Federal Reserve meeting, while the dollar continued to slip versus other global currencies.
Copper for May delivery on the Comex division of the New York Mercantile Exchange fell 1.2 cents to close at $2.2525 per pound. Trade ranged from $2.2445 to $2.2725.
The red metal has seen increased fund buying for four straight weeks and gained 3.4 percent alone last week during the most recent rally. But the market was spurred by a falling dollar and technical buying, which started to slow at the end of last week.
"Base metals were mostly lower this morning as participants take a cautious approach to start the new week ahead of key economic data and Central bank meetings," Benjamin Wong of ADM Investor Services said. "Metals having gained smartly this month and in technically overbought territory only adds to this cautious approach."
Over the weekend, Chinese data showed a substantial increase in government lending – nearly doubling from the previous year. Beijing has continuously expanded its monetary policy to stabilise the economy and prevent an economic hard landing.
"Prices drifted lower today in a quiet market a narrow range. This was in spite of more positive Chinese data," Triland Metals said.
Meanwhile, in market fundamentals, the global refined copper market posted a moderate surplus of 56,000 tonnes in January, which compares with a production surplus of around 15,000 tonnes a year earlier, according to the International Copper Study Group (ICSG),
"The market should tighten noticeably during the course of the year - both on the demand side (Chinese imports reached a record level in March) and on the supply side (substantial production cuts have been announced)," Commerzbank said in a note.
"While we believe that correction potential has built up in the short term, we see the price well-supported in the medium to long term," the broker added. "[However,] disappointing economic data could continue to take the wind out of the sails of the metal price upswing."
The Markit US flash manufacturing PMI for April came in at 50.8, below the forecast of 51.9, under the previous reading of 51.5 and the worse reading since September 2009.
"The PMI suggests the pace of economic growth at the start of the second quarter is marginally weaker than the average seen in the first quarter, and slightly slower than the average seen last year," Markit said.
Today's economic agenda today is light, with Japan's services PPI unchanged at 0.2 percent while the German Ifo business climate disappointed at 106.6. From the US, new home sales in March came in at 511,000, below the forecast of 521,000
Turning to US markets, the Dow Jones industrial average and S&P were each down 0.4 percent, while the dollar softened 0.4 percent to $1.1269 against the euro.
As for other commodities, light sweet crude (WTI) oil futures on the Nymex slipped $1.11 or 2.5 percent at $42.62 per barrel while the most active Comex gold contract was at $1,238.60 per ounce, up $8.60 or 0.7 percent.
"It may be that commodity prices have now run ahead of the fundamentals and may need time to correct and consolidate," William Adams, FastMarkets' head of research, said.
(Editing by Tom Jennemann)