Will Copper Shine Bright in 2013?
?? Fundamentals
Copper futures prices are starting to show some signs of life after trading in a relatively narrow price range during the past 4 weeks. Some of the optimism for prices going forward is tied to data that Chinese manufacturing activity is improving.
The HSBC manufacturing index turned positive for growth in the manufacturing sector in November, which may signal that Copper demand should improve. China accounts for about 40% of global Copper demand, making its economic environment widely watched by many traders.
Outside of China, the demand picture for base metals is muted, especially in Europe, with many members of the EU currently mired in recession. Despite the mixed global signals for Copper demand, Copper production is not expected to keep pace with demand , with the International Copper Study Group (“ICSG”) anticipating a 400,000 ton Copper deficit for 2012.
Speculators, both large and small, are currently net-short Copper futures, with the most recent Commitment of Traders report showing a combined short position of 7,763 contracts as of November 20th. This short position could be the catalyst for a rally in prices, should we start to see much better than expected economic data in the coming weeks.
??? Technical Notes
Looking at the daily chart for March Copper, we notice a potential “rounded-bottom” formation, which would be confirmed should the March futures trade above 3.6000. The 14-day RSI has moved from near oversold levels to a more neutral stance, with a current reading of 50.77.
Volume has been increasing during the recent upward move in prices, though that may be due to the rolling of positions out of the December 2012 contract, which is nearing first notice day. The 200-day moving average, currently near 3.6145, looks to be the next major resistance level for March Copper, with support found at 3.4145.??
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