As market fears of the banking crisis declined, copper is rising. This was the reaction of investors to UBS's acquisition of its troubled competitor Credit Suisse. At the weekend, the Swiss government acted as an intermediary for the deal between UBS and Credit Suisse. Its actions provide a guarantee of protection against possible losses during the sale of assets. In addition, the U.S. Fed and five other central banks have announced a collaborative effort to increase the dollar's liquidity.
These measures have closed problematic spots in the economy, but it is a temporary solution.
Copper is also supported by positive data on copper reserves in China.
Over the day, copper inventories in China decreased by 7,500 tons to 218,700 tons. The reduction in reserves of eastern China is due to the sharp drop in copper prices last week and an active increase in demand. The supply of imported copper to Shanghai also increased. The inflow of imports will continue this week.
Analysts have different opinions on future commodity prices. This uncertainty may partially disappear after the Fed meeting on Wednesday. Until then, copper can move just based on technical indicators.
WisdomTree commodities strategist Nitesh Shah noted the sensitivity of metal markets to macroeconomic trends. Things happening in the banking sector could cause a slowdown of economic activity. Central banks have taken action to maintain liquidity levels around the world. At the same time, traders and economists are still disagreeing about the Fed's actions at Wednesday's meeting.
According to the technical analysis, copper is in a local downtrend and now is close to its upper boundary. Short positions opening looks quite logical within the range movement. Support of the local lows and proximity to the lower boundary of the trend may be the target. The 200-day moving average will save from going lower. Thus, the downside target for copper will be $8,500. Stop-loss can be set at a breakdown of the trend up near the level of the last highs at $8,950.
Decrease in the price of copper:
Take profit – 8,500
Stop-loss – 8,950
This content is for informational purposes only and is not intended to be investing advice.