Copper price continued its bullish push this week amid the continued recovery of demand from China. Earlier this month, UK-based copper producer Rio Tinto lowered its copper production estimates from a high of 205,000 tonnes to between 135,000 – 175,000 tonnes on delays in the restart of its Kennecott mine smelter in Utah. This is predicted to produce copper supply shortfalls, that has led an analyst at UK-based consultancy Roskill to predict further increases in copper prices this year, despite its prediction of a drop in copper consumption by 3-4% by the end of 2020. It is also predicting further disruptions in mine supplies, along with a rise in China’s copper exports by 11.5% in 2020.
Total stores of copper have slipped in 2020 due to the shutdown of many production facilities as the coronavirus pandemic spread. Copper stocks in Chinese warehouses are said to have dropped by as much as 40% in the three months from March to July 2020. The London Mercantile Exchange is also reporting low inventories.
Copper price has risen nearly 50% from the 23 March 2020 low, and currently trades at 2.9900 on the back of a 5-day winning streak.
Technical Outlook for Copper Price
The daily chart on the XCUUSD pair shows that copper price burst out of the flag consolidation area as it continues its recovery above the previous 2020 highs. The initial breakout was resisted at the 8 February 2018 lows of 3.0275, and a pullback to the flag’s upper border ensued, with copper price bouncing off that border in fulfilment of the technical expectation for this pattern.
Copper price is aiming to retest the 3.0275 price level. A breakout above this price resistance allows copper price to seek for the 3.0920 resistance (2/3 March 2018 lows), with the highs of 15/25 May 2018 expected to constitute a further resistance target at 3.1255.
On the flip side, rejection at 3.0275 allows for a possible retest of 2.9795, with 2.8695 and 2.8020 appearing to be logical downside targets below the initial support at 2.9795. Further targets below 2.8020 will have to rely on a breakdown of the channel.
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Copper Price Chart (daily)
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