Copper is starting to firm above the $400.00 level as traders start to factor in a massive infrastructure spending from the Biden administration and a low-rate high growth environment in the world’s largest economy.
Metals prices have seen a solid pick-up over recent days, following the announcement that the Biden administration wants to launch a multi-trillion US dollar infrastructure and green energy stimulus package.
Copper would feature heavily in the US governments plans and would be one of the key metals used in the regeneration of the United States infrastructure. Supply issues could soon come into play.
China has had a mighty appetite for copper and rare earth minerals over recent years, as they embarked on a similar infrastructure spending spree, which still shows few signs of slowing down.
Bloomberg recently released a report that highlighted that China imported 6.7 million tons of unwrought copper last year, a third more than the previous year and a full 1.4 million tons more than the previous annual record.
Additionally, the report warned that China’s buying copper prices have doubled from their March 2020 nadir to current levels around $9,000 a ton. While their analysts also expect that copper price and other commodities prices still have much further to run.
The outlined bullish dynamics for the red-metal, plus positive seasonal affects coming into play through April and May paint a bullish price picture for copper prices this quarter.
Traders therefore have few reasons to be bearish towards copper right now, even if corrective move under $400.00 takes place, in fact it could be a great chance for accumulation.
The ActivTrader Sentiment Tool continues to show that 48 percent of traders are bearish towards copper, while 52 percent are bearish. We really need to see a one-way sentiment skew before a major new short-term trend gets going.
A change or upcoming one-way sentiment could be crucial in timing the next major directional. Overly negative sentiment could help the continuation of the existing uptrend.
Copper Short-term Technical Analysis
Looking at the lower time frames, copper selling has been very weak below the $400.00 level, and the metal has once again started to make higher lows, which is bullish in the short-term.
A notable triangle pattern has also formed, which is front running a potential breakout in copper. A directional move of some $40.00 is expected once we see the metal breaking from the $390.00 to $415.00 price range.
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Copper Medium-term Technical Analysis
The larger picture for copper prices still shows an inverted head and shoulders pattern, which remains activated while the price trades above the $380.00 level.
It is notable that bears have been completely unable to move the price under the $380.00 level during the recent decline.
According to the overall size of the bullish reversal pattern, copper prices could rise towards the $600.00 level, making it critical that bulls hold the price above neckline support, around the $380.00 level.
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