Copper price continues its remarkable recovery following the massive slump seen in March and April 2020, as the coronavirus pandemic forced China to lock down its factories. Copper price activity shows some upside today, gaining 0.58% to trade at 2.6655.
Copper price action is regarded as a barometer of the health of the global economy, as 40% of the world’s production takes place in China. China, in return, is the world’s largest consumer of the metal, which has extensive industrial usage. Expectations of a reopening of the global economy have led to a recovery in price, despite the dire global economic outlook provided by the IMF and World Bank. In reality, the global economy has not fully reopened, and a resurgence of the virus may threaten any further attempts at full reopening. So while copper prices are heading higher, significant headwinds lie ahead.
What is driving copper prices right now is a general market expectation that was fired up by recent manufacturing data from China that showed an improvement over the previous two months. However, real demand needs to return, and this can only come from improved factory activity data over several months.
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Outlook for Copper Price
Copper price action is approaching the 2.6860 resistance area, which is where previous highs formed on 30 October and 29 November 2019, as well as 10 June 2020. A look at the chart will show a potential double top. This pattern will only be complete if the price is rejected at the immediate resistance, followed by a retreat towards the 200-day simple moving average, which presently constitutes the neckline and a further drop below it.
If this move is actualized, the copper price would indeed be following the macroeconomic expectations. The initial target for traders who decide to trade such a move would be 2.4485; this is the price projection point that equates to the measured move from the 2.6860 resistance to the 200-SMA line at 2.5535, where we also have lows of 4 October 2019, 7 February 2020 and 20 June 2020. Further decline would target 2.3580.
On the flip side, further advance beyond 2.6860 targets the resistance zone, which has 2.7490 as its ceiling. Above this ceiling, 2.7720 constitutes the next resistance target, with 2.8695 located at some distance above this level. Such a move would negate any chance at forming a double top and allow for price recovery to continue.
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