Copper price has retested eight-year highs amid the weaker dollar and optimism about vaccine-fuelled economic recovery. So far, copper price, a measure of industrial growth and global economic wellbeing, has rallied big on renewed expectations of additional stimulus.
Copper, a global economic bellwether, rallied hard this week on expectations of the passage of a $1.9 trillion US stimulus package in Congress, which boosted hopes for swifter economic recovery.
However, copper price is down today, a day before the commencement of the Chinese New Year holiday. China is the world’s biggest consumer and the break is expected to lead to lower demand, hence the drop. This may however be counteracted by tighter supplies, which still fail to meet the resurgent demand for the product.
Inventories at LME and COMEX warehouses are said to be dropping. At 73,500 tonnes, copper stocks in LME warehouses are at 15-year lows.
Technical Levels to Watch
Today’s initial bullish open met resistance at 3.7945 but failed to surmount it and a pullback selloff is on. However, intraday lows are well above the existing support at 3.7345, suggesting that selling pressure remains low. Copper price needs to achieve a closing penetration north of 3.7945 to maintain the uptrend. If this is achieved, then 3.8340 could become achievable.
On the other hand, a drop below 3.7345 could initiate a further selloff that targets 3.5755 and possibly 3.4895. A further decline below 3.4895 breaks down the long-standing support and brings in 3.3925 into the picture.
Copper Price; Daily Chart