Copper has been declining ever since the "China reopening" trade failed. Disappointing economic data from China, coupled with the lack of action from officials, contributed to this downturn. However, more recently, the People's Bank of China (PBOC) proceeded with cuts to its benchmark rates, but the market sold off after the fact as the market may have wanted to see more. The global manufacturing sector remains in a downturn due to tighter monetary conditions and weaker demand. All else being equal, we can expect more downside for copper going forward.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that the recent rally from the 3.5475 support has stalled at the 3.9575 swing resistance and sold off in what seemed a “sell the fact” trade after the PBOC cut the LPR rates. Copper has now fallen below the previous 3.8245 resistance and the moving averages are threatening a crossover. What happens here will be key for the copper market.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that copper has been trading cleanly within a rising channel coming towards the 3.9575 resistance. The last leg higher diverged with the MACD in what could have been a good signal that the price was about to reverse there. In fact, copper started to fall and as soon as the price broke below the lower bound of the channel, momentum sellers jumped onboard and extended the selloff into the 3.7730 level.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another divergence with the MACD and the price action formed what looks like an expanding wedge pattern. From here we should see the price rallying back into the swing high level at 3.8440 where we can also find the 38.2% Fibonacci retracement level of the entire since the 3.9575 resistance. The sellers will be waiting at the 3.8440 level with a defined risk above and target a new low into the 3.72 level. The buyers, on the other hand, will want to see the price breaking higher to pile in and extend the rally towards the 3.9575 resistance first and eventually the 4.1855 swing high.
