Copper has been falling steadily this month as fears around the Chinese economy continued to weigh on the market. In fact, the stock market of the largest Copper importer in the world has been on a free fall and the worst part is that the PBoC did not cut interest rates despite expectations for such an action. More recently, we got some help from the US data though as Retail Sales showed strong consumer spending and the falling Jobless Claims put aside the fears around the labour market. Moreover, there are growing expectations for a more aggressive stimulus from Chinese officials given the hopeless sentiment in the market with the first action coming today from the PBoC which announced a 50 bps RRR cut.
Copper Technical Analysis – Daily Timeframe
On the daily chart, we can see that Copper bounced from the key support around the 3.73 level where we had also the 50% Fibonacci retracement level for confluence. The buyers stepped in with a defined risk below the support to position for a rally into the 4.03 level and the rally extended today following the PBoC RRR cut announcement.
Copper Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price diverged with the MACD right at the support zone which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the target for the pullback was around the 3.83 level where we had also the 38.2% Fibonacci retracement level and the daily 21 moving average for confluence. Given today’s breakout, the reversal got confirmed and the buyers should now look for dip-buying opportunities. The sellers, on the other hand, will need the price to break below the upward trendline to invalidate the bullish setup and position for lower lows.
Copper Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is now a bit overstretched. From a risk management perspective, the buyers will have a much better risk to reward setup around the 3.84 support zone where we can find the confluence with the trendline, the 61.8% Fibonacci retracement level and the red 21 moving average. A break below the trendline will be the first opportunity for the sellers as they will look for a drop into the major upward trendline and upon a further break, target the 3.73 support.
Upcoming Events
Today the main event will be the US PMIs as the market will want to see how business activity has fared in January after some worrying data from regional surveys. Tomorrow, we have the Advance US Q4 GDP and the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the US PCE report. Weak data is likely to weigh on Copper while strong figures should keep on supporting the market.
