Copper Technical Analysis

Since the rumours of China's reopening emerged in November 2022, Copper experienced a notable surge. The market anticipated a surge in demand for the metal, considering China's position as the largest global importer and consumer of copper. However, these expectations started to diminish due to persistent disappointments in China's recovery data, leading to a decline in copper imports during the first quarter of 2023. Moreover, the contraction of Manufacturing PMIs worldwide indicated a global manufacturing slump.

Consequently, the "China reopening trade" reversed, and copper returned to the levels observed in November 2022. However, there has been a recent rebound in copper prices driven by more positive news from China and speculation regarding potential economic stimulus measures. This speculation arises from the declining inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term in China, which poses a threat of transitioning into deflation. In response, the People's Bank of China (PBOC) has already implemented some rate cuts, and expectations are growing for further cuts in the MLF (medium-term lending facility) and LPR (loan prime rate) in the coming days.

Copper Technical Analysis – Daily Timeframe

On the daily chart, we can see that copper’s rally has stalled at the key 3.8245 resistance level. The bearish trend has recently turned bullish after the price bounced from the major upward trendline and the 3.5475 support. In fact, the moving averages have crossed to the upside and we may be about to see a breakout to the upside as China is trying to bolster demand with more expansionary monetary policy.

Copper Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price has been diverging with the MACD coming into the 3.8245 resistance. This is generally a sign of weakening momentum often followed by pullbacks or reversals. If the price breaks below the lower bound of the channel, we should see the price falling back to the base of the channel at 3.6955. A strong breakout to the upside would invalidate the bearish setup though and lead to a rally towards the 4.000 level.

Copper Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that from a risk management perspective, the best place for the buyers to enter the market would be the lower bound of the channel so they can have a better risk to reward setup. The sellers, on the other hand, can either lean on this resistance area targeting a bigger move to the downside or wait for the price to break the lower bound of the channel to pile in and target the 3.6955 level first and eventually the 3.5475 support.