Fundamental Overview
Copper has been rallying like crazy in the first part of the year amid a pickup in global growth, Chinese stimulus measures and concerns over tightness in global mine supply. Unfortunately, as it’s often the case, the rally attracted the momentum players, the price got overstretched and we got a big correction to the downside.
FT reported that stocks in Shanghai warehouses reached the highest level since 2020 amid tepid demand because of the China’s real estate sector downturn. Given the high prices reached in the last month, manufacturers held off from buying as they had an incentive to run down their stockpiles.
FT also added that Chinese copper fabricators have very recently started buying the metal again, with inventories recording slight decreases in the past two weeks. All else being equal, if we keep seeing positive growth and maintain the risk-on sentiment, we could see new highs in the months ahead with the Chinese officials increasing the policy support if the data was to show some deceleration.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that copper has been experiencing an aggressive correction to the downside after setting a new all-time high. The price bounced recently on a key level at 4.35 where we can also find the 50% Fibonacci retracement level for confluence.
This is where we can expect the buyers to step in with a defined risk below the level to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 4.00 level.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a trendline defining the current bearish trend. The buyers will want to see the price breaking higher to gain some more conviction and extend the rally into the 4.67 level where we have also the 38.2% Fibonacci retracement level of the entire correction. If the price gets there, we can expect the sellers to lean on that level to position for a break below the 4.35 support with a better risk to reward setup.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is rejecting the trendline as the sellers are stepping in with a defined risk above it to position for a drop back into the support targeting a break below it. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the US Housing Starts, Building Permits and the latest US Jobless Claims figures. On Friday, we conclude the week with the US PMIs.
