Copper has giving all its gains since hitting this year’s peak of 295.50 a ton in early May, touching a three-week low on Wednesday on account of a firmer dollar. A firmer dollar makes dollar-denominated commodities such as copper costlier for buyers using other currencies.
Copper has performed relatively well since the sell-off in January, so going forward with prices already relatively elevated, it’s hard to see how things can go higher unless we see significant uplift in demand.
China, Europe, and the US are among the world’s biggest users of this important industrial metal. Although China, with its huge manufacturing sector, is by far the biggest consumer of copper, and 70% of copper used in China is imported.
China’s GDP growth is heading below 7 per cent, the lowest since the darkest days of the financial crisis. Home demand is bland, foreign demand for Chinese goods is weakening. Property prices in major cities are falling, and bank non-performing loans rising. Meanwhile India has stolen China’s glamour rating, helped by political reform and turbo-charged by the falling oil price.
China’s imports of unwrought copper and copper alloy were 380,000 tons in April, taking imports in the first four months of the year to 1.35 million tons, down 14.7% from a year ago.
The commodity since the beginning of the year fell more than 0.75% and is in a potential phase change from recovery to a bearish phase, being squeezed by the 10 and the 50-week moving averages. Last week copper plunged and close near the low of the week. The Stochastic is showing an overbought market and an increasing bearish momentum.
Expecting downward move to a weekly key level at 265.95 on a break below the upward trend line at 276.85 (scenario 1).