Fundamental Overview
Copper experienced a strong rout last week with market participants blaming the soft Chinese economic data and the increase in inventories in most global warehouses suggesting some weak demand.
The PBoC tonight surprised with rate cuts across many key benchmarks. Moreover, the recent PBoC policy framework reform suggests that the Chinese officials could take more actions to spur growth.
In the big picture, stable global growth and major central banks cutting rates into resilient economies should be bullish drivers for the copper market and more expansionary policies from Chinese officials might give an even stronger boost.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that copper eventually broke through the key 4.35 support where we had also the 50% Fibonacci retracement level for confluence, and extended the drop into the 4.21 level.
There’s not much else to glean from this timeframe as the sellers might want to see a pullback before piling back in while the buyers will look for opportunities on the lower timeframes to position for a rally back above the 4.35 level.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the sellers will have a much better risk to reward setup around the 4.35 level where they can step in with a defined risk above the resistance. The buyers, on the other hand, will want to see the price rising back above the 4.35 resistance to increase the bullish bets into the 4.67 level next.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the recent price action formed what looks like a falling wedge. This is generally a reversal pattern, so the buyers will want to see the price breaking above the minor downward trendline to pile in for a move higher.
The sellers, on the other hand, will likely keep on leaning on the minor trendline to keep pushing lower but if the price were to break higher, the next entry point for the sellers should be the trendline around the 2.28 level. The red lines define the average daily range for today.
Upcoming Catalysts
This week is pretty empty on the data front. We begin on Wednesday with the release of the US Flash PMIs. On Thursday, we will get the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the US PCE report.