China’s reopening emerged in November 2022, Copper experienced a notable surge.
The market anticipated a surge in demand for the metal, considering China’s
position as the largest global importer and consumer of copper. However, these
expectations started to diminish due to persistent disappointments in China’s recovery
data, leading to a decline in copper imports during the first quarter of 2023.
Moreover, the contraction of Manufacturing PMIs worldwide indicated a global
manufacturing slump.
Consequently, the
„China reopening trade“ reversed, and copper returned to the levels
observed in November 2022. However, there has been a recent rebound in copper
prices driven by more positive news from China and speculation regarding
potential economic stimulus measures. This speculation arises from the
declining inflation in China, which poses a threat of transitioning into
deflation. In response, the People’s Bank of China (PBOC) has already
implemented some rate cuts, and expectations are growing for
further cuts in the MLF (medium-term lending facility) and LPR (loan prime
rate) in the coming days.
Copper Technical Analysis –
Daily Timeframe
On the daily chart, we can see that copper’s rally
has stalled at the key 3.8245 resistance level.
The bearish trend has recently turned bullish after the price bounced from the
major upward trendline and the
3.5475 support. In fact, the moving averages have
crossed to the upside and we may be about to see a breakout to the upside as
China is trying to bolster demand with more expansionary monetary policy.
Copper Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see that the price has
been diverging with the
MACD coming
into the 3.8245 resistance. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. If the price breaks below the lower
bound of the channel, we should see the price falling back to the base of the
channel at 3.6955. A strong breakout to the upside would invalidate the bearish
setup though and lead to a rally towards the 4.000 level.
Copper Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that from
a risk management perspective, the best place for the buyers to enter the
market would be the lower bound of the channel so they can have a better risk
to reward setup. The sellers, on the other hand, can either lean on this
resistance area targeting a bigger move to the downside or wait for the price
to break the lower bound of the channel to pile in and target the 3.6955 level
first and eventually the 3.5475 support.
This article was written by ForexLive at www.forexlive.com.