Fundamental Overview
The Chinese Politburo announced that it will adopt a “moderately loose” strategy for monetary policy for 2025, which marked the first major shift in stance since 2011.
Moreover, the language around fiscal policy was stepped up to “more proactive” from just “proactive” in another sign that Chinese officials intend to ease policies more forcefully to prop up the economy.
The market will now expect big rate cuts and asset buying, which should support the copper market going forward. Copper is generally tightly correlated to the Chinese stock market which shows the strong dependence of the commodity to the Chinese economy.
That should not be surprising given that China is responsible for more than 60% of global copper demand. Overall, the picture is more bullish than bearish for the copper market with global monetary easing likely leading to positive global growth expectations.
The US ISM Manufacturing PMI recently showed the New Orders index, which is a proxy for demand, rising for the third consecutive month. The index has also jumped into expansion for the first time since March. So, the stars seem to be aligning for a nice 2025.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that copper is pulling back after bottoming out around the 4.10 level. The price is getting closer to the downward trendline which is defining the bearish momentum on this timeframe. We can see that we have also a strong resistance around the 4.31 level for confluence.
That’s where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 4.70 level next.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a very choppy price action in the past few weeks as the market has been waiting for a catalyst to pick a direction. Today’s catalyst should push the price into the major trendline and most likely provide an upside breakout.
If the price were to pull back, we can expect the buyers to step in around the 4.18 level to position for the break above the trendline. The sellers, on the other hand, will look for a break lower to increase the bearish bets into new lows.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly today’s rally on the Chinese news. The price made a new high and it’s now consolidating between the 4.26 level and the top of today’s average daily range.
We can expect the buyers to pile in around these levels with a defined risk below the 4.26 support to position for the break above the trendline. The sellers, on the other hand, will want to see the price falling back below the 4.26 level to target a pullback into the 4.18 support next.
Upcoming Catalysts
This week is going to be more tranquil on the data front. On Wednesday, we have the US CPI report which is also going to be the main event of the week. On Thursday, we get the latest US Jobless Claims figures and the US PPI.
