Copper price declined by more than 10 basis points as sentiment in the market declined. The Bloomberg Commodities Index (BCOM) declined by 20 basis points. Among the worst-performing commodities were soybeans, cotton, and palladium.
Copper as the barometer of world economy
Dr. Copper is widely regarded as the barometer of the world economy. When the world economy does well, it leads to higher demand for the metal. Similarly, when the world economy slumps, the metal tends to underperform. For example, its price has declined by more than 18% this year because of the coronavirus-related risks.
The price of the metal declined today because of the ongoing tensions between the US and China. As I have written before, the US has accused China of causing the pandemic. Trump has also threatened to add more tariffs on the goods from the country.
China has responded swiftly. The country has blamed the US for not heeding to earlier warnings about the disease. In a strongly-worded editorial, the Global Times called out Mike Pompeo for making groundless accusations. They asked him to bring forward the evidence. The editorial continued:
“The Trump administration continues to engage in unprecedented propaganda warfare while trying to impede global efforts in fighting the COVID-19 pandemic.”
Global economy recovering
In the past few weeks, the copper price has been on an upward trend as most countries have started to reopen. China, notably, has seen significant improvements in the past month. According to Xinhua, the total import and export value in China has increased by 57.42% since February. The report said that with exception of March, activities at Chinese ports is returning to normal.
This is evidenced by a recent report by the Financial Times, which said that BHP and Rio Tinto had started to see a rebound in Chinese steel sector. In a report, BHP said that it had also started to see more demand for copper. However, it expects lower production at Escondida and Olympic Dam. This decline will partially be offset by a strong concentrator throughput.
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Copper price technical forecast
On the daily chart, the copper price found significant resistance at $2.3945, which is slightly below the 50% Fibonacci retracement level. The price is now trading at the 38.2% retracement level, which is slightly above the 50-day EMA. I expect the copper price to be under intense pressure if it ends the day in the red. By so doing, the price will have formed a three black crows pattern, which is usually a bearish sign.
On the other hand, if the price ends the day in the green, it could send a signal that there are buyers in the market. This could see the price attempt to retest the previous high of $2.3945.
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