Copper continues to be tightly correlated with what happens in China. In fact, we saw strong rallies following news of more policy support from the Chinese authorities, but the lack of strong actions weighed on Copper as the bulls keep on get disappointed. Yesterday, we even got very weak Chinese imports data that led to a big selloff. All else being equal, we should keep on seeing the rallies getting sold as the bears remain in control and without a very strong support from China, the global economy will keep on weakening.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that Copper failed to break above the 3.9575 resistance leading to a fakeout and the subsequent selloff, as it generally happens following fakeouts. The price has also broken below the trendline that was supporting the bullish trend and the bias has now switched from bullish to bearish. The sellers should target the major upward trendline first with a break below it opening the door for a fall into the 3.5475 support.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a good resistance zone around the 3.8440 level where we can find the downward trendline, the red 21 moving average and the 50% Fibonacci retracement level for confluence. This is where the sellers should pile in with a defined risk above the trendline and target the major trendline. The buyers, on the other hand, will want to see the price breaking above the trendline to invalidate the bearish setup and pile in for a return into the 3.9575 resistance.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bearish setup. More conservative sellers may want to wait for the price to break below the counter-trendline before piling in and extend the selloff to new lows.
Upcoming Events
This week the main events will be the US CPI and Jobless Claims reports tomorrow. For the US CPI, the market is likely to focus more on the Core readings as this is what the Fed is more interested in. Higher than expected data may lead to a risk off sentiment as the market should start to price in a more hawkish Fed and it might weigh on Copper as well. On the other hand, lower than expected readings may lead to a risk on sentiment due to the soft-landing narrative and no more rate hikes. At the same time of the US CPI data, we will also see the latest US Jobless Claims report, which might have an even bigger effect if the data shows a big surprise. In fact, a miss may cause recessionary fears and lead to a selloff in Copper, while a beat may be taken as good news in the short term as the resilience in the labour market can sustain overall demand.
