Breakout or Bull Trap for Copper
Today’s Spotlight Market
Copper is not the only member of the base metals group to find some bullish news. Nickel prices have risen sharply of late, as a continued export ban out of Indonesia coupled with concerns that Russian Nickel sales could be reduced if economic sanctions increase, has triggered rendered buying interest by speculators. Stainless Steel producers, the largest end users of Nickel, have been scrambling to secure supplies as prices rise adding to the buying pressure seen in the Nickel market.
Fundamentals
Continued uncertainty regarding the strength of the Chinese economy has failed to halt the recent rise in Copper prices after trading near 4-year lows. Lead month Copper futures have gained strength on the back of lower Copper inventories in both Shanghai and London Metal Exchange (LME) warehouses. Copper supplies have become tight in China, which has encouraged Chinese Copper smelters to curtail exports of the red metal and selling into the domestic market where spot prices are trading at a premium as buyers scramble to obtain supplies. Copper prices pulled back on Tuesday after trading at fresh 2-month highs, following a lower than expected reading on Chinese Industrial output in April. Copper bears point to sluggish economic data out of China as a sign that the world?s most populous nation is facing some headwinds in its economy which would traditionally be a bearish weight on commodity prices, including that for Copper. However, trend-following technical traders may become increasingly bullish on Copper prices should the recent rally hold above chart support which could trigger additional buying from momentum based trading systems and potentially diminish the importance of economic data out of China at least in the short run.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for July Copper, we notice prices have recently broken-out to the upside after spending the past several weeks in an 8-cent price range. Although the market is trading well over the short-term 20-day moving average (MA), there is still some steep upside resistance prior to a test of the widely watched 200-day MA, which is currently near the 3.2200 price level. 3.1770 is seen as the next resistance level for July Copper, with support found at 3.0650.
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