The strong rally in copper prices has stalled at a critical resistance, which could allow the asset to close the week nearly unchanged. After taking a beating in March and April, copper prices have rebounded and recovered their 2020 highs, fuelled by an increase in demand from China and supply shortfalls from number 1 producing country, Chile.
Apart from the ongoing coronavirus pandemic which has hit Northern Chile’s mining belt, workers at the Antofagasta Zaldivar mine are threatening industrial action after failing to agree to a new wage deal. Forward guidance for 2020 production as provided by the Chile copper commission looks gloomy; a drop in 2020 production by as much as 240,000 tonnes is expected if the coronavirus cases in the mining belt continue unabated.
China’s factory recovery is also driving demand. China’s copper imports in June climbed 50% from the previous month, posting a new monthly record in the process. The 656,500 tonnes of copper that were imported by China doubled that of the same month last year.
Despite this week’s lull in the rally, the fundamentals remain on the bullish side of the equation.
Technical Outlook for Copper Prices
The copper price candle is presently trading at 2.9060 per pound, having retreated from the intra-weekly high of 2.9930. The resistance at 2.9795 is the price to beat for the bulls, having been the site of the April 2019 high and also the site of previous lows of Dec 2017 and March 2018. A break above this level targets the 3.0920 price area, with 3.1865 standing by to assume a role as a possible target if prices advance beyond 3.0920.
Conversely, failure to breach 2.9795 could produce a pullback towards 2.8695 and possibly the 2.7490 price level. Only a breakdown of the support wall between 2.5158 and 2.6020 allows for a drop to 2.4485 and below.
Copper Price Chart (Weekly)