Copper price on the XCUUSD chart has extended its losses for the week on the back of improving supply in the global market. Yesterday, I did indicate that improved supply from the top copper producers, Chile and Peru, had filled a lot of the supply shortfalls that were seen in May and June in the global market. Copper prices have been in a 2-month bull run after the coronavirus pandemic interrupted mining activities in northern Chile and the Peruvian mines. The government in those countries closed the mines as miners began to contract the coronavirus, leading to a drop in production from both countries. But with supply now being restored, copper price action has turned bearish, as market forces come to play.
Furthermore, this afternoon news upbeat non-farm payroll numbers have provided a boost to the US dollar. As such, the popular copper paring which pits copper (XCU) against the US dollar (USD) in the XCUUSD pairing, is trading lower on the day.
Adding to the fundamentals that have started to pressure copper price is the latest escalation in US-China relations. The US President Donald Trump signed an executive order asking Chinese companies Bytedance and Tencent Holdings to sell the TikTok and WeChat apps to US investors or shut down in 45 days. China’s recovering factory activity as well as increasing industrial demand, has played a large part in the recovery of the 2020 highs by copper price. New tensions between the US and China could spook investors and put further pressure on copper prices. We should also factor in the resurgence of the coronavirus in many countries as a factor that could wear its head once more to beat that price is the way it occurred in February 2020.
Technical Outlook for Copper Price
We shift focus to the short-term charts to get a picture of the near-term price action on the XCUUSD pair. Copper is trading within a descending channel which is the flag consolidation area of a bullish flag set up if price action from May to date is considered. Price is now beginning to head to the lower end of this consolidation channel where it is expected to find support, in fulfilment of the technical expectations of this pattern. Presently the prices testing this lower border, which intersects with the S1 pivot support at 2.8272. However, if price breaks below the channel’s lower border, it could make a run for the 2.7490 price support. Yet, this move has to contend with the 2.8020 support and the S2 pivot at 2.7895.
On the flip side, a bounce off the lower border of the channel returns the price action towards the channel’s upper limit. This move has to contend with the 2.8695 resistance, with the 2.8865 central pivot and the 2.9270 intraday resistance forming possible short-term targets.
XCUUSD 4-Hour Chart