Copper news and analysis
- Weak Chinese data and low demand for copper call recovery into question
- Technical levels that must be taken into account when analyzing the possibility of a continuation of copper’s decline
- The analysis in this article is used chart patterns and key Support and resistance levels. For more information visit our comprehensive website Educational library
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Copper is often seen as a leading economic indicator as demand for the metal rises during an economic expansion and falls during a contraction. Copper is highlighted, but similar conclusions can be made when looking at a broad industrial metals benchmark such as the S&P GSCI Industrial Metals Index, shown below.
S&P GSCI Industrial Metals Daily Chart
Source: Refinitiv, compiled by Richard Snow
After enjoying a massive upside during the global recovery and reopening period, metal prices have stabilized but turned lower again.
Softer Chinese data and reduced copper demand raise doubts about recovery
Copper prices fell this week after China reported excellent import and export data. On Wednesday, China revealed that its imports contracted sharply in April while exports rose at a more sluggish pace, revealing that reopening the world’s second-largest economy is not having the impact analysts had hoped. In addition, Chinese demand for copper has declined which may be a response to the decline in aggregate demand that is currently occurring as major economies continue to slow growth in a higher interest rate environment.
Technical levels to watch for copper
Copper prices have been hinting at a sharper move lower for some time now, waiting for a catalyst. Since it topped out in January of this year, prices have been on the decline, posting lower highs and, for the most part, lower lows.
The recent move lower showed some follow through with yesterday’s declines, as well as Wednesday’s decline. 8442 was passed with relative ease, which sent prices down to the next support level around 8188, where prices seem to have found some support ahead of the weekend. If the downward movement will continue, closing below 8188 will naturally bring focus to 7865 as the next support area.
Given the large sell-off, it is not surprising that the RSI has delivered an “oversold” signal – often leading to a short-term pullback before traders evaluate the next move. Resistance appears at the previous support at 8442.
daily copper chart (IG)
Source: IG, prepared by Richard Snow
– Posted by Richard Snow for DailyFX.com
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