The weakness in the global manufacturing sector and especially in the Chinese economy have been weighing a lot on Copper prices. We had a good rally following the news of China pledging more stimulus to support the economy, but eventually most of the upside got undone as the Chinese Manufacturing PMI fell into contraction for the first time in 3 months. The headwinds for Copper remain and the market can’t run for too long based just on expectations, so the fundamentals need to turn around if we want to see a sustained move higher.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that Copper has been trying to break above the 3.9575 resistance for a long time and eventually managed to do so this week. Unfortunately, that turned into a fakeout as the miss in the Chinese Manufacturing PMI on Tuesday caused a selloff in the metal. The price is now bouncing on a trendline as the buyers are positioning for another try, but a break below the trendline would spell trouble for Copper.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the fakeout and the selloff into the trendline. This is where the buyers are starting to pile in to target another breakout. The fakeouts are generally reversal patterns so the bias remains bearish, but they can be an even stronger confirmation of the trend if the price manages to break out after a fakeout. So, if the price rallies back towards the resistance, watch out for what happens there.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the market structure is currently bearish as the price has been printing lower lows and lower highs. If the price now rallies above the most recent lower high at 3.8785, it would be an early sign of a change in trend. The buyers are likely to pile in in such a case targeting the resistance and eventually a breakout. The sellers, on the other hand, will have two different options to position for another selloff:
- The first one will be leaning on the 38.2% Fibonacci retracement level of the entire selloff around the 3.9150 level with a defined risk above the resistance.
- The second one will be leaning on the resistance at 3.9575 to position for a selloff with an even better risk to reward setup.
Upcoming Events
Today we have the US Jobless Claims and the ISM Services PMI, while tomorrow it will be the time the US NFP report. If the data is benign, we should see Copper rising as the soft-landing narrative expectations would strengthen. If the data is bad though, we are likely to see a selloff as recessionary fears should spill over the markets. Moreover, if the data is too strong, the market may expect a more hawkish Fed and eventually lead to a fall in Copper due to headwinds like higher rates, higher US Dollar and risk off sentiment.