Copper buyers are running out of steam

Copper prices reached a new low since January 6 yesterday, being pressured by the news of the U.S. banking sector problems. However, the drawdown was fully covered towards the end of Monday's trading session, and copper even managed to rise by more than 1% by the end of the day. However, the decline has resumed today, and we may well see another attempt of the "bears" to push the prices into the range of 8700-8750.

A release of U.S. inflation data for February is Tuesday's main event. The market expects a slowdown in price growth from 6.4% to 6%. If the data meets expectations, inflation will be the lowest since September 2021. However, it’s important to remember that the January data was much worse than expected (price growth slowed down by only 0.1% to 6.4% while the forecast was 6.2%), so surprises are also possible this time.

News on the copper market points to the price decrease as summer approaches. The China’s National People's Congress recently set an economic growth target for 2023 at 5%, which is quite underwhelming compared to previous years, and gives reason to suggest further demand decline.

Economic activity in the U.S. is not at its best as well. The most recent data indicated a contraction in total construction spending. In addition, an increase in supply could potentially disrupt the supply-demand balance, pushing the copper price even lower. A number of major mines have recently resumed or ramped up production, and reported to have substantial stockpiles of copper.

The copper price is gradually forming a falling trend on the daily chart, moving away from January's highs. A downward trend development could lead prices into the range of 8700-8750, making the January 6-9 gap closure at the level of 8600 very likely to happen.

Consider the following trading strategy option: 

Sell copper at no higher than 8850. Take profit 1 – 8750. Take profit 2 – 8700. Stop loss – 8900.

Traders may also use Trailing stop instead of a fixed Stop loss at their discretion.