Copper prices are attempting to continue the rebound from the 8700 support, that started at the end of last week. Now the quotes are halfway to the 9000 level, and in case of success they are likely to test the local highs of March just above 9080. Both technical and fundamental factors are not preventing a short-term rise in copper prices.
Consumer inflation in China hit its 18-month low in March. The National Bureau of Statistics reported a 0.7% year-over-year increase in prices, which is the lowest rate of inflation since September 2021. The Reuters forecast suggested a more substantial price increase of 1.0%.
Demand in the Chinese economy remains weak for the moment. This supports the argument that additional measures are needed to support an unbalanced economic recovery. On the background of low inflation, China's economy will be supported primarily by the government. In this case, the demand for commodities, including copper, will increase.
On Monday, copper reserves in China's main markets decreased by 7,600 tons to 194,700 tons compared to Friday. In fact, the current decline in copper inventories is mainly due to a build-up in purchases in the middle of last week, when copper prices fell below 69,000 yuan per ton. Moreover, the supply of copper to China from abroad was relatively small. Some imports of copper to China are also expected this week. However, shipments are likely to be made in smaller volumes compared to last week.
The road to 9000 is now open for copper prices. A buy signal from the Stochastic indicator is also in favor of growth together with the development of a rebound from support 8700. In case the level of 9000 is reached, the next upside target would be the February-March highs range of 9080-9200.
The following trading strategy option can be suggested:
Buy copper in the 8800-8850 range. Take profit 1 – 9000. Take profit 2 – 9080. Stop loss – 8700.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.