LME Copper convenience yields show that inventories are extremely low, with metal leaving the system recently. This is driven by rising demand from China and the US, creating a need for metal to return to avoid running out of stock. In Shanghai, traders have sold a significant amount of Copper positions, totaling 84.5k metric tons this month. Even so, deliveries are still sparse. However, increased buying from Commodity Trading Advisors (CTAs) may push LME flat prices and the curve upwards. By June, the AUD/USD hit resistance around 0.6550 but recovered to above 0.6400, influenced by a sell-off in the US Dollar. Similarly, EUR/USD approached 1.1630 due to hints of possible interest rate cuts from the Fed. Gold prices are hovering near $3,400 due to geopolitical tensions, particularly after Iran’s missile activities. Former Coral Capital executives are planning a $100 million investment in cryptocurrency, coinciding with a 4% gain in BNB. As geopolitical tensions rise, the threat of closing the Strait of Hormuz resurfaces, especially as tensions between Israel and Iran escalate. Trading foreign exchange carries risks, and using leverage can lead to losses. It’s crucial to understand your investment goals and risks before engaging in trading. The current situation in copper markets reveals a risk framework beyond just supply and demand. The decline in LME convenience yields indicates extremely low warehouse stocks, at a historic low. The recent drawdown signals a severe shortfall likely caused by increased building activity in the US and changes in forward booking from Chinese buyers. As metal continues to be pulled from visible exchange inventories, the tightness in supply remains a significant concern. This scarcity is evident as the curve shows a premium over the spot price, especially in the near months. If short-term stock levels do not improve soon, we expect further steepening in backwardation. This steepening is no coincidence; it reflects genuine concerns over securing physical delivery rather than just paper returns. Additionally, even with the recent unloading of over 84,000 metric tons of copper contracts on the Shanghai exchange, we haven’t seen a corresponding increase in immediate deliveries, highlighting an underlying scarcity of metal. The involvement of CTAs has started to influence flat pricing again. These strategies, driven by price trends and momentum, could amplify market movements. When inventory shortages collide with model-driven orders, both the curve shape and spot prices can react sharply. While timing is challenging, it appears that the risks are skewed, especially for those closing short positions or rolling forward contracts. In the FX markets, the AUD/USD rebound past 0.6400 coincided with a decrease in demand for the dollar. This isn’t just a technical overshoot; it’s a strategic shift based on expectations regarding the US central bank’s direction. The resistance near 0.6550 should not be seen only as structural; it likely indicates a pause as macro players assess future rate expectations. Similarly, movements in EUR/USD towards 1.1630 suggest investors are positioning themselves ahead of potential rate cuts. Data supports an increased commitment to the European currency, likely at the expense of short-term loyalty to the dollar. Gold has once more taken on the role of a geopolitical hedge, with current prices suggesting more than mere sentiment. The rise toward $3,400 follows heightened risks around the Strait of Hormuz, fueled by recent missile launches. These issues are significant for global shipping, as volatility in crude and natural gas prices often starts from concerns in that area. Traders should stay alert for potential cross-sector impacts. Rising tensions between Israel and Iran, specifically regarding potential maritime blockades, add complexity to risk models. These developments should be viewed as primary triggers rather than mere theoretical risks, changing correlations and affecting relative value trades across metals, energy, and increasingly, digital assets. Speaking of digital assets, the planned $100 million crypto fund by former Coral Capital executives comes at a time when BNB has gained 4%, amidst a broader sector rally. Although still a small part of most derivative portfolios, money flowing into token-based assets is becoming harder to overlook, especially as traditional safe-haven assets like gold adjust in price. For those managing derivative strategies, the upcoming weeks will demand close attention to physical indicators, particularly metal stockpile reports and shipping data, along with momentum model signals. Both of these inputs can serve as tipping points that standard macro filters may overlook. We continue to keep a close watch.

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