As predicted last week, copper showed a strong increase in price, renewing its two-month highs. A significant number of buyers took profits above the level of 9100, and now we are witnessing a pullback to the level of 9000. The price has already reached correction targets at 23.6% (9050) and 38.2% (8970) Fibonacci levels. However, as the price is approaching the 50% level (8910), the downside movement has slowed down and is very likely to stop completely.
This morning, China's economic data was published. It appeared to be positive for all commodities. GDP showed a 4.5% growth during Q1 2023, exceeding analysts' expectations (4%). China is the world's largest consumer of copper, and an acceleration of economic growth may significantly boost demand for the metal. This could push copper prices to new highs.
Meanwhile, a situation with copper stockpiles is rather worrying. The LME's copper stockpiles are heading towards their lowest levels in 18 years. Since 2020, copper inventories at the LME have fallen by over 78% from 250,000 tonnes to just 54,000 tonnes in April 2023. In response to strong demand, the price of the metal has soared by 80% over this period.
Copper inventories in China are also low, equal to less than a week's worth of consumption. The industry may face a shortage of copper as supply growth remains insufficient. Many analysts are predicting the price to surpass the $10000/tonne level.
The current trading range of 8910-8970 looks attractive for an increase in long positions. If the price does not break down the 61.8% Fibonacci level (8850), a return to 9050 and 9100 will remain the upside target, where it is worth taking profits.
Consider the following trading strategy:
Buy copper in the range of 8910-8970. Take profit 1 – 9050. Take profit 2 – 9100. Stop loss – 8850.
Traders may also use a Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.
