Since the China reopening rumours/news back in November 2022, Copper has been rallying strongly as the market expected more demand for the metal considering also that China is the world’s largest copper importer and consumer. Those expectations started to ebb as China’s factory recovery kept on disappointing and China’s copper imports even fell in the first quarter of 2023. We are also experiencing a global manufacturing slump as many Manufacturing PMIs keep falling deeper into contraction.
All of the above, contributed to an unwind of the “China reopening trade” and we are now almost back at where we were back in November 2022. We can see that copper has bounced recently as we started to get more bullish news from China and possibly more economic stimulus to come soon. Nevertheless, the big picture bias remains bearish at the moment, but the technicals can help to navigate the different scenarios.
Copper Technical Analysis – Daily Timeframe
On the daily chart, copper has recently bounced from the upward trendline and even broken out of the downward trendline showing some strong bullish momentum. The moving averages have crossed to the upside and we are now seeing some struggle at a swing high resistance.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, the divergence with the MACD we’ve highlighted last week worked out pretty perfectly as the price rallied to the swing high target at 3.7765. The moving averages are acting as dynamic support and we have a new minor upward trendline that could offer an entry point for the buyers. The 3.7765 resistance may be strong enough to offer a deeper pullback into the trendline where the buyers will be waiting to target the 3.9410 resistance.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have an ascending triangle as the price keeps printing higher lows trading into the 3.7765 resistance zone. If we see copper breaking higher, the buyers should pile in more aggressively and extend the rally to new highs. If the breakout fails though, we can expect the buyers to lean on the 3.69 support area where we find the confluence of the trendline, previous resistance turned support and the 61.8% Fibonacci retracement level.
The sellers, on the other hand, are likely to lean on this 3.7765 resistance zone to target the 3.69 support zone first and a breakout of the trendline next where we can expect even more sellers to pile in and extend the selloff into the 3.5475 low, if not lower.
