The weakness in the global manufacturing sector and especially in the Chinese economy have been weighing a lot on Copper. We had a good rally last week as the Chinese inflation data raised the risk of deflation in China and the market expected more easing measures from the central bank. Unfortunately, these expectations were wrong and the PBoC didn’t do anything on the rates front causing a disappointment in the market and another selloff.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that Copper has rallied back into the resistance at 3.9575 where we have also the 61.8% Fibonacci retracement level as the market expected more easing coming from China. The disappointment though, led to a quick selloff back into the support at 3.8245. What happens here is likely to decide the next major move.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is already reacting to the 3.8245 support as the buyers are stepping in with a defined risk below the level to target another rally into the 3.9575 resistance and eventually a breakout. The sellers, on the other hand, will want to see the price breaking below the support to pile in even more aggressively and extend the selloff into the trendline near the 3.68 level.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have in fact a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. The buyers are likely to pile in here to target the resistance, but they will also need to break above the 3.86 swing level to confirm the bounce and pile in even more aggressively. The sellers, on the other hand, may also lean on the 3.86 swing level to position for a break lower with a better risk to reward setup.
Upcoming Events
The most likely report that can move the market will be the US Jobless Claims on Thursday. The data needs to deviate notably from the expected figures though. Anyway, a big miss should cause a selloff in Copper as the market will start to fear a recession, while a big beat should support the Copper prices as the soft-landing narrative remains intact.