Copper futures are lower by 11.6% ytd and the most recent leg has caused prices to implode 7.7% just in the last two weeks. May futures traded to their?lowest?level?in almost four years?intra-day before a sharp?reversal that?currently?has copper nearly a dime off ?their intra-day lows. Most of the depreciation of late can be attributed to concerns on the Chinese?economy?and the drop in the yuan. The fear investors have is the drop in the yuan will force Chinese manufacturers to cut back on the amount of raw material i.e copper they import. ECON 101- the weaker yuan must be converted to dollars to bring in commodities from abroad and this weaker currency reduces their buying power. Why China matters in terms of copper pricing is they?account?for roughly 40% of global?demand.?
The drop in cropper has been?making?headlines in the?newspaper?and even the talking heads and in my eyes the?ship is?leaning?too hard one way and I?would?suggest?a line in the sand is?being?drawn near?current?lows and we get a ?bounce?from current levels. I will not take a trade in copper but I will use the?anticipated?movement to guide my clients with entry and exit in other?instruments. As you can see on the?chart?below?I have?established?Fibonacci?levels and also a down sloping trend line just above the?$315?level?in?May?futures. I think in the coming weeks futures bounce to that level.?
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