Copper is lagging behind other precious metals, which rose amid problems in the U.S. banking sector. The US authorities took measures to contain the crisis caused by the outflow of depositors from Silicon Valley Bank and Signature Bank. The growing banking crisis is a warning of possible recession. On the background of this news, Goldman Sachs Group Inc. said it no longer expects the Fed to hike rates next week. Unlike other precious metals, copper somehow indicates the well-being of the economy. The bankruptcy of a major bank is likely to seriously undermine the US economy, which means that copper is now at risk of retracement.
On Sunday, US regulators were forced to take action to contain the problem in the banking industry. The Fed created an emergency line of credit, allowing banks to pledge a number of high-quality assets for cash for a period of one year.
Such measures will save the situation at the moment, but the overall picture remains unfavorable for the US economy.
The US nonfarm payrolls data for February also had a major impact on the situation. The recent data showed a slowdown in growth of salaries along with an increase in the unemployment rate. This led to the dollar's decline, as the Fed now has more opportunities to keep the pace of rate hikes relatively moderate.
However, the number of new job openings was again higher than expected, bringing further strength to the labor market and uncertainty to investors. The US consumer price index data will be released on Tuesday, which might cool the market bulls' enthusiasm. This will happen in the case of inflation being worse than expected again.
According to the technical analysis, copper price is testing the limit of the uptrend from the bottom, a downward rebound is likely to happen. In this case, the downside target will be the local low, which has already been tested several times in recent trading sessions. It’s the level of $8700. Let’s place a stop-loss on a break of the upward resistance and a break of the downward trend, which is $9,000.
A decline in the copper price:
Take profit – 8700
Stop-loss – 9000