Copper continues to be tightly correlated with what happens in China, which is not surprising given that China makes up for more than 50% of world imports. In fact, we saw how the stimulus hopes raised the price of Copper, and weak economic data and lack of major actions from the authorities depressed the commodity. Last week, the PBoC finally cut rates on some key benchmarks but refrained to proceed in a similar way with other key benchmarks this week. Overall, it looks like we can forget about a big economic stimulus, and given the weakening global economy, Copper is likely to remain a “sell on rallies”.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that after the big selloff from the 3.9575 resistance, Copper has bounced on the key upward trendline and it’s now near a resistance level. Moreover, we can see that the price is now testing the red 21 moving average and we are likely to see the sellers leaning on it to position for further downside. Eventually, this major triangle pattern is going to resolve on either side and what follows is generally a big and strong move.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that Copper has pulled back into a strong resistance area where we can find the 38.2% Fibonacci retracement level and the daily 21 moving average. This is where we can expect the sellers to pile in with a defined risk above the area to target a break below the major upward trendline. The buyers, on the other hand, will want to see the price breaking above the resistance to target a break above the downward trendline and open the door for much higher prices.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, if we get a pullback, the buyers are likely to lean on the minor upward trendline and target a break above the resistance. Conversely, if the price falls below the trendline, it will confirm the reversal and the sellers will pile in to target a break below the major upward trendline.
Upcoming Events
This week is pretty empty on the economic data side as we will only have the PMIs today and the US Jobless Claims tomorrow. If the data surprises to the upside we might see some strength in Copper in the short term, but the prospects of more rate hikes might drive it down soon after. On the other hand, weak data should weigh on Copper as global growth is already fragile with the economic problems in China and weakness in the other major economies is not going to help. Remember also that this is the Jackson Hole Symposium week, so we will hear from many central bankers including Fed Chair Powell, who is set to speak on Friday.
