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Copper Price Technical Analysis: Bullish Momentum Accelerates

Copper Price Outlook:

  • Copper price continued their rebound from their lows in May as China’s zero-COVID strategy appears to be coming to an end.
  • Copper supply exceeded demand in 1Q’22, according to the recent update from the International Copper Study Group.
  • Excess copper inventories could fade if China continues to drift away from zero COVID.

China counts the most

Copper prices have had a difficult four and a half months in 2022. Demand for copper has ceased to outstrip supply for much of the year, as shown in the International’s May newsletter Copper Study Group (ICSG). According to the report, the copper market had a surplus of 77,000 tonnes in 1Q’22, even as “Government-imposed restrictions related to COVID-19 and sustained infection rates due to the Omicron variant continued to limit mining production in a number of countries in early 2022.

But the past three weeks have brought modest better fortunes for copper prices. Some of the aforementioned government restrictions — primarily China’s zero COVID strategy — appear to be fading. An expected surge in demand from the world’s largest consumer of copper has provided speculative support for copper prices since mid-May.

This does not mean that all is well for copper prices in the future. The short-term technical outlook may have improved, but for Dr Copper, a deterioration in the global macro outlook for the global economy suggests that sideways trading – which has been the predominant trend since March 2021 – is likely to continue over the course of the year. of the next few months. .

COPPER PRICE TECHNICAL ANALYSIS: DAILY CHART (March 2020 to June 2022) (CHART 1)

Copper prices recovered the 23.6% Fibonacci retracement of the 2020 low/2021 high range at 4.2000 and in doing so stabilized above their daily EMA of 21 (one-month moving average ). Momentum indicators continue to turn more bullish. Copper prices are above their daily envelope of 5, 8, 13 and 21 EMA, which is not yet in bullish sequential order. The daily MACD is trending up but remains below its signal line, while the daily Slow Stochastic is just entering overbought territory. A move to the May high at 4.440 looks possible in the near term.

COPPER PRICE TECHNICAL ANALYSIS: WEEKLY CHART (November 2008 to June 2022) (CHART 2)

Copper Price Technical Analysis: Bullish Momentum Accelerates

With the multi-month bull flag still technically intact, the current fundamental environment suggests that it will remain intact for the foreseeable future. If copper prices experience a short-term rally towards 5000, it may be appropriate to look for opportunities to “sell the recovery”.

— Written by Christopher Vecchio, CFA, Senior Strategist

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