Trade wars playing havoc on commodities

• Copper is breaking lower this morning and has just taken out a 4-hour trendline.
• Oil is also struggling today dropping just over 1.50% on the session.

Risk Backdrop

The risk theme this afternoon is softer after Donald Trump failed to confirm the rollback of tariffs.

Adding to thing the police clashing with protesters in Hong Kong also sent sentiment lower.

The interesting thing about today is that we could hear from Trump at any point and this sell-off could reverse.

Copper Chart

Dr Copper is trading 1.1% lower this morning and has broken the trendline to the downside.

Just last week copper was trading at USD 2.72 per pound after trade war sentiment was higher.

Copper is a good barometer on the health of the talks between the US and China.

If the talks are going well and optimism is high then the price of copper will rise.

Copper is also correlated with AUD and today is underperforming compared to its counterparts against the USD.

Oil Chart

WTI has met some strong resistance at USD 57.50 per barrel and like copper, if the trade war rhetoric is positive then oil markets will be.

Another problem with the oil market at the moment is the recent build in inventories on both American Petroleum Institute (API) and Department of Energy (DoE)readings.

It has also been said that OPEC+ members do not want another production cut.

This could be due to the fact that the biggest oil firm in the world (Saudi Aramco) will be listing (IPO) soon.

On the WTI chart below if the price gets to near USD 55.86 per barrel it would confirm a technical trend change. 

If the market makes a lower high and lower low pattern the psychological USD 55 per barrel support would come into play.