LME Copper convenience yields indicate critically low inventories, with metal exiting the system recently. This is due to increased demand from China and the United States, suggesting a need for metal to return to prevent stock-out fears.

Shanghai traders have sold substantial Copper positions, totalling 84.5kt notional month-to-date. Despite this, deliveries remain scarce, yet CTA buying might increase pressure on LME flat prices and the curve.

By June, the AUD/USD faced resistance around the 0.6550 mark, recovering to above 0.6400, influenced by a US Dollar sell-off. Similarly, EUR/USD eyed 1.1630, boosted by the Fed’s potential interest rate cut indications.

Notably, gold trades near $3,400 amid geopolitical tensions, especially following Iran’s missile activities. Former Coral Capital executives plan a $100 million cryptocurrency investment, coinciding with a 4% BNB gain.

Amid rising geopolitical concerns, the Strait of Hormuz closure threat resurfaces as tensions between Israel and Iran escalate. In general, trading foreign exchange involves risks, where leverage could lead to losses. Understanding one’s investment goals and risks before trading is vital.

What we’re currently seeing in copper markets signals a framework of risk that’s not limited to simple supply-demand imbalance. The drop in LME convenience yields points to extremely depleted warehouse stocks. Not just low, but historic in context. The recent drawdown reflects an acute shortfall, likely driven by stronger build-out activity in the US and a shift in forward booking behaviour from Chinese buyers. As metal continues to be pulled from visible exchange inventories, nearby tightness remains a concern. This scarcity isn’t just being hinted at—it’s manifesting through the curve carrying a premium over spot, particularly in the front months.

If short-term stock levels don’t begin to rebuild soon, we anticipate further steepening in the backwardation. That steepening isn’t accidental. It usually reflects real concern over physically securing delivery rather than paper returns. What’s more, despite noticeable unloading of copper contracts on the Shanghai bourse—where traders recently reduced by over 84,000 metric tonnes in notional value—we haven’t seen a corresponding uptick in prompt delivery. That dislocation flags an underlying lack of metal, not just repositioning.

CTA involvement has begun to reassert influence over flat pricing. These systemic strategies, driven by price signals and momentum, might extend moves by adding layers of pressure. When inventory-driven tightness converges with model-driven orders, both the shape of the curve and spot levels can react violently. Timing remains difficult, but risk asymmetry, particularly for those unwinding short positions or rolling forward, appears skewed.

Turning to FX markets, the rebound in AUD/USD past 0.6400 came as dollar appetite faded. It wasn’t a technical overshoot, but a deliberate adjustment based on expectations surrounding US central bank direction. Resistance near 0.6550 shouldn’t be interpreted solely as structural. It likely reflects a pause as macro participants weigh the forward rate outlook rather than a hard ceiling. Similarly, in EUR/USD, moves towards 1.1630 reflect investor attempts to pre-position ahead of possible rate easing. The flow data confirms broader commitment toward European currency allocation, likely at the expense of short-term dollar loyalty.

Gold, meanwhile, has once again stepped into what some have referred to as a geopolitical hedge, but current pricing suggests it might be more than sentiment. The move toward $3,400 came following heightened risk around the Strait of Hormuz, with tensions inflamed by recent missile launches. These events matter in commodity terms too, given the passage’s relevance for global shipping. Volatility in crude or natural gas pricing often begins with concern in that corridor, and traders should remain alert for cross-sector effects.

The reopening of threat vectors between Israel and Iran, specifically regarding potential maritime chokepoints, adds another layer to risk models. That should be watched as a primary trigger in the near future rather than a theoretical tail risk. Each development adjusts correlations and alters relative value trades across metals, energy and, increasingly, digital assets.

Speaking of which, the planned $100m crypto fund by former Coral Capital figures arrives during a green run for BNB, which saw a 4% lift amidst a broader sector rally. While still a marginal component of most derivative portfolios, flows into token-based assets are becoming harder to ignore, particularly as traditional risk-off assets like gold reprice.

For those managing derivative strategies, the upcoming weeks will require specific attention to physical indicators—particularly metal stockpile reports and shipping data—and momentum model signals. Inputs from both can create tipping points unrecognised by standard macro filters.

We continue to monitor.