Copper prices continue to consolidate, but a violent breakout could happen soon
COPPER PRICE OUTLOOK:
- Copper prices have been trapped in a narrow range since the end of June
- Price action without direction indicates indecision and a lack of conviction in the market
- From a fundamental point of view, a downward movement seems likely
Read more: Copper prices are testing key trend support. What does technical analysis suggest?
After a massive sale in the first three weeks of June, copper price (XCU / USD) seem to have entered a consolidation period as some commodities stagnated against growing concerns about the global recovery. On the daily chart below, we can see that since June 22, the industrial metal has traded in a range of $ 4.15 to $ 4.39., twisting like a spring and oscillating between the top and the bottom of the interval again and again. This behavior, which testifies to indecision on the part of market participants, is often the prelude to a strong price movement once the consolidation phase in question is over.
From a technical point of view, it is important to closely monitor support at $ 4.15 and resistance at $ 4.39. If one of these levels is crossed decisively, the copper could stage a great go in the direction of the break. That said, if the price breaks the current low at $ 4.15, The next area of interest is at $ 4.08, where last month’s low converges with a long-term ascending trendline in play since March 2020. Conversely, if $ 4.39 is pulled higher, buyers could push copper towards $ 4.58.
BASIC COPPER ANALYSIS
Fundamentally, there is cause for concern about the near-term outlook for industrial metals. Economic growth appears to have peaked in the United States alongside the decline tax support and seems cooling in China as well as the government trying to deleverage the economy. The observed slowdown in activity could reduce global demand for copper, limiting its upside potential in the near term.
Another cause for concern is China renewed efforts to suppress raw material prices. In this regard, the government announced today that on July 29 it will sell 30,000 tonnes of copper, 90,000 tonnes of aluminum and 50,000 tonnes of zinc from the stocks of the National Administration of Food and Strategic Reserves. Although the move was widely anticipated following a similar move earlier this month, any future intervention to bring commodity inflation under control can be seen as a mild bearish catalyst for copper.
With China which should release more metal reserves until the end of the year and the Emerging US dollar rebound, copper remains in a vulnerable position in the third trimester. Risks to its outlook could even increase if physical demand from manufacturers begins to decline in the middle delta strain coronavirus outbreaks. Although some traders speculate that the exaggerated anxiety on the delta variant will to calm down in a few weeks, the bearish scenario for copper should not be completely ruled out.
DAILY COPPER PRICE TABLE
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— Written by Diego Colman, DailyFX Market Strategist