Copper Price Continues Steep Slide on Coronavirus Fears
As the coronavirus continues to spread to all regions in China and abroad, copper futures (XCUUSD) continue to take a massive hit, as the two-week slide has driven the price down to 2.51083. China is the world’s largest consumer of copper, which it requires as part of raw materials to drive its industries.
More than 40% of the world total production capacity lies in China. 50% of the total industrial metal utilization is in China, with copper constituting a large chunk of this ratio. The coronavirus outbreak has sparked fears that an economic slowdown could cause radical drops in demand from China, leading to a cooling of prices.
Yesterday, preliminary reports from the CME Group indicate that volume and open interest on copper rose by 3,000 and 7,600 contracts respectively. Price has broken below the ascending channel and fulfilled both time and price filters. The weekly candle has also violated the 2.53518 support (previous cluster of lows from March to June 2017, low of 31 December 2018 and another bunch of lows from August to October 2019). However, the weekly candle needs to close, and the penetration measured to see if it meets the breakdown’s price filter.
With the next support level located at 2.46254, it would appear that there is still more downside momentum left in XCUUSD. However, 2.53518 still needs to be decisively broken by at least a 3% closing penetration to the downside to open the pathway towards the 2.46254.
Failure to breach this critical support area at 2.53518 could allow for some profit taking by sellers, allowing XCUUSD to attempt a pullback towards the broken channel border, with 2.59729 being the next upside pitstop that withstands this move.