Copper price action is taking a breather today after Monday’s strong showing. Copper price futures had spiked on Monday after Chinese imports of the metal soared 81% on recovering demand.
Data from the Chinese customs reveals that unwrought copper imports had risen to 762,211 tonnes, representing a spike of 81% in July, which exceeded June’s figures by 16%.
However, base metals came under selling pressure on the London Metal Exchange, forcing copper price to dip by more than 3%. Analysts are attributing the selloff to the present political stalemate in the US, with talks between Democrats and Republicans over extending the stimulus package that expired on July 29 deadlocked.
Furthermore, rising tensions between the US and China are stoking fears of trade sanctions, which could suppress demand from China. US Secretary of State Mike Pompeo fired a salvo today, insisting that the Confucius Institute and other Chinese cultural organizations working with US universities must register as foreign missions. In a statement provided to Reuters, Pompeo said that the so-named Confucius institutes were “advancing China’s global propaganda and malign campaign on US campuses.”
China is the world’s largest importer of copper and demand from China is a hefty price-mover of the commodity. Copper price is trading at 2.7970, down by 3.25% as at the time of writing.
Technical Outlook for Copper Price
The price action on the XCUUSD daily chart shows that today’s selloff has breached the lower channel border, and is also testing the 2.8020 support. Confirmation of the breakdown of this support opens the door for the copper price to approach the 2.7490 support, with 2.6860 and 2.5535 also lining up as possible downside targets.
On the flip side, a bounce on the 2.8020 support allows the copper price bars to enter into the channel once more, where it may challenge the 2.8695 resistance. A break of this level opens the door towards 2.9795, but the channel’s upper border may constitute a barrier to this move.