Fundamental Overview
Copper remains under pressure, albeit the bearish momentum appears to be slowing. Last week, the FT reported that stockpiles in Shanghai warehouses hit their highest level since 2020 amid weak demand due to China's real estate sector downturn. Given the high prices reached in the previous month, manufacturers refrained from buying since they had an incentive to deplete their inventories.
The FT also reported that Chinese copper fabricators appeared to have resumed buying the metal, with stocks showing minor declines in recent weeks. All else being equal, if we continue to see the pickup in global growth, we could see new highs in the coming months, although more policy support from the Chinese officials would give the market a stronger boost.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that after a minor bounce, copper fell back to the 4.35 support 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 the downside momentum seems to be slowing as the lower lows get shallower. This might be a signal for a reversal although a break to the downside could invalidate it.
If we do get a rally from these levels, the first target for the buyers should be around the 4.66 level where we can find the 38.2% Fibonacci retracement level of the entire correction. That’s also where we can expect the sellers to step back in with a better risk to reward setup to target a break below the 4.35 support.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline defining the current downward momentum. The buyers will want to see the price breaking higher to gain more conviction and increase the bullish bets into the 4.66 level. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US PCE.
