Forecast of copper price dynamics released last week met the expectations. The price fell to 8,700, however “bears” did not stop there and sent it to the lows of the beginning of the year. On the copper chart the falling channel was formed, from the lower boundary of which the metal rebounds. The current growth momentum is unlikely to break through the downtrend, but there is a potential of moving at least to an upper boundary of the channel.
Yesterday’s rise in copper prices was due to the dollar’s weakening and signs of improving China’s demand. Financial markets partially recovered from recent losses after the Swiss government supported the acquisition of troubled Credit Suisse by UBS Group. It reduced concerns about the state of the global banking sector.
Commodities strategist at WisdomTree Nitesh Shah outlined the high sensitivity of metal markets to macroeconomic trends. The current situation in the banking sector might cause a slowdown in economic activity. Central banks have taken actions to maintain global liquidity. At the same time, traders and economists still disagree on the Fed’s decision at Wednesday’s meeting.
However, Trafigura representatives believe that copper prices might hit new record highs during the next 12 months because of stock shortages. In China, the Yangshan copper premium rose to the highest level since December. It showed higher demand for copper from the world’s largest consumer of industrial metals, which might have a positive impact on prices.
The nearest growth target for copper prices is 8,800. In case “bulls” succeed, the upper boundary of the channel might be tested, which is now nearby 8,900. The Stochastic indicator reversed from the oversold area and signaled to buy the metal, supporting the opening of long positions.
The following trading strategy may be offered:
Buy copper in the range of 8,550-8,650. Take profit 1 – 8,800. Take profit 2 – 8,900. Stop loss – 8,450.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.