Copper continues to be tightly correlated with what
happens in China. In fact, we saw strong rallies following news of more policy
support from the Chinese authorities, but the lack of strong actions weighed on
Copper as the bulls keep on get disappointed. Yesterday, we even got very weak
Chinese imports data that led to a big selloff. All else being equal, we should
keep on seeing the rallies getting sold as the bears remain in control and
without a very strong support from China, the global economy will keep on
weakening.
Copper Technical Analysis –
Daily Timeframe
Copper Daily
On the daily chart, we can see that Copper failed
to break above the 3.9575 resistance leading
to a fakeout and the subsequent selloff, as it generally happens following
fakeouts. The price has also broken below the trendline that was
supporting the bullish trend and the bias has now switched from bullish to
bearish. The sellers should target the major upward trendline first with a
break below it opening the door for a fall into the 3.5475 support.
Copper Technical Analysis –
4 hour Timeframe
Copper 4 hour
On the 4 hour chart, we can see that we have a good
resistance zone around the 3.8440 level where we can find the downward
trendline, the red 21 moving average and the
50% Fibonacci retracement level
for confluence. This is
where the sellers should pile in with a defined risk above the trendline and
target the major trendline. The buyers, on the other hand, will want to see the
price breaking above the trendline to invalidate the bearish setup and pile in
for a return into the 3.9575 resistance.
Copper Technical Analysis –
1 hour Timeframe
Copper 1 hour
On the 1 hour chart, we can see more
closely the bearish setup. More conservative sellers may want to wait for the
price to break below the counter-trendline before piling in and extend the
selloff to new lows.
Upcoming Events
This week the
main events will be the US CPI and Jobless Claims reports tomorrow. For the US
CPI, the market is likely to focus more on the Core readings as this is what
the Fed is more interested in. Higher than expected data may lead to a risk off
sentiment as the market should start to price in a more hawkish Fed and it
might weigh on Copper as well. On the other hand, lower than expected readings
may lead to a risk on sentiment due to the soft-landing narrative and no more
rate hikes. At the same time of the US CPI data, we will also see the latest US
Jobless Claims report, which might have an even bigger effect if the data shows
a big surprise. In fact, a miss may cause recessionary fears and lead to a
selloff in Copper, while a beat may be taken as good news in the short term as
the resilience in the labour market can sustain overall demand.