The price of copper started to fall back from just below the $400.00 level last week after signs emerged that China is once again starting to see large cases of COVID-19 emerging.
It was also the case that copper actually tested its key 200-day moving average, whereby it was swiftly rejected. This was the first test of the 200-day moving average this year.
China has been locked in months of COVID quarantine has this been a big drag on the copper market recently as COVID-19 harms the domestic economy and the property has reportedly been in dire trouble.
The country of China is where 52% of the world’s copper goes. A harsh recession there would badly hurt demand and could balance the market, though much of that consumption is for re-export in products.
Copper is usually considered a proxy for global growth. When copper demand is strong it normally means that the Chinese economy is starting to accelerate or is experiencing solid growth.
Sentiment towards copper has been the biggest risk in the market over recent months as the market turned heavily bullish towards the red metal. Sentiment towards copper is now bullish.
According to the ActivTrader platform some 74 percent of traders are bullish. With the current sentiment bias towards copper, I believe more short-term downside in the red metal seems the most likely scenario.
Copper Short-term Technical Analysis
The four-hour time frame shows that copper has regained its short-term bullish bias and is now started to move back towards its key 200-period moving average
It is also noteworthy that a bearish head and shoulders pattern with a $30.000 upside target has been invalidated. This is very encouraging in the short-term and the risk is a much larger bearish pattern is forming.
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Copper Medium-term Technical Analysis
The larger picture for copper prices remains bearish because the red-metal has been rejected from its 200-day moving average, which is a key benchmark of medium to long-term strength.
At the moment the price of copper is also trapped within its lower long-term range. Those with a keen eye will also see that the $400.00 level is key for further upside.
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© 2019 High Leverage FX - All Rights Reserved.