Copper price has been able to stage a weak recovery even as the Chinese government cut interest rates and provided an additional stimulus to combat the coronavirus effects on the market. However, downside risks remain, and the XCUUSD pair finds itself in a consolidation formed by the rising wedge.
China is the world’s largest importer of copper, which it uses to feed its thirsty industrial machines. The shutdown of several industrial complexes and limitation of transportation in coronavirus-affected provinces has had a devastating impact on copper prices as a result of reduced demand.
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Technical Outlook for XCUUSD
Copper price action is confined to a consolidation marked by a rising wedge pattern after the pair suffered some of the most massive losses it has endured in a while. Price is now trading close to the upper border of the rising wedge.
The expectation of this pattern is for a breakdown of the lower border of the wedge to occur, leading to lower copper price. There is a support level that lies at this area; the 2.60232 price area where previous lows of 3 June, 10 September and 4 December 2019 lows are found. If this breakdown move materializes, the next copper price target could be the 2.53518 price level. Continuation of this move could then target 1.29154, which would lead to the completion of the measured move from the breakdown point.
On the flip side, continued recovery from risk-on sentiment in the market could push the copper price candles out of the wedge to the upside, which invalidates the pattern and opens the door towards further upside targets at 2.69527 and 2.74875 (neckline of “M” harmonic pattern of December 2019/January 2020.
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