Copper price looks set to end the week lower, despite today’s bullish performance. This week’s lower close is as a result of risk-aversion that hit the markets as a consequence of the events surrounding Brexit. Demand from China continues to be the driver of copper prices, as Chinese Customs data showed that the country was still importing a lot of the red metal, even though the levels dropped off from the previous figures.
Historically low copper inventories are also helping to cap whatever downside is coming from non-copper fundamentals, as copper stocks in warehouses approved by the London Mercantile Exchange (LME) remain at 15-year lows.
The downside to copper prices appears to come from fundamentals outside the industry itself, but analysts are confident that the projected 2% growth in Chinese demand this year, despite the coronavirus pandemic, will help keep prices higher.
The consequences of a cheaper US Dollar for risky commodity importers such as China is that dollar-priced copper becomes less expensive for those holding other currencies, which could improve demand even further.
Technical Outlook for Copper
Copper price has bounced off the support at 2.9795 following yesterday’s corrective move. This support was able to stop the price from hitting the ascending support trendline which connects the higher lows on the XCUUSD daily chart.
However, today’s bounce has also met resistance at the 3.0275 price level. If price can break above this level, the next target could be the 3.0920 resistance, which meets the ascending trendline that connects the price tops from 13 July till date. The price picture resembles a rising wedge in evolution. However, a break above 3.0920, which targets 3.1255 or 3.1865, invalidates the pattern and puts copper prices on the pathway towards 30-month highs.
Conversely, a breakdown of 2.9795 puts pressure on the ascending support trendline. If this trendline gives way, this completes the rising wedge and puts copper price on the path towards 2.8695, with 2.8020 and 2.7720 lining up as potential support levels for the future.
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XCUUSD Daily Chart
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