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The price of copper has started to retreat as precious metals come under pressure after the recent Fed metals and a strong technical rejection from copper’s 200-day moving average.
COVID-19 is also causing problems with a top risk-on sentiment. Beijing has vowed to go all out next year to save its Covid-hit economy by boosting consumption and loosening control over private industry, including the struggling tech and property sectors.
The new pledge marks a big shift from leader Xi Jinping’s years-long effort to rein in private businesses, which were perceived as too powerful and “disorderly.”
The world’s second-biggest economy faces multiple challenges. Covid infections are surging in China after leaders unexpectedly eased its restrictive Covid policy earlier this month. At the same time, its exports have been hurt by a slump in global demand.
Stabilizing economic growth is the top priority for 2023, according to an official readout following the conclusion of the Central Economic Work Conference (CEWC), a key annual meeting of top leaders, which ended Friday.
The country of China is where 52% of the world’s copper goes. A harsh recession there would badly hurt demand and could balance the market, though much of that consumption is for the re-export in products.
Sentiment towards copper has been the biggest risk in the market over recent months as the market turned heavily bullish towards red metal. Sentiment towards copper is now bullish.
According to the ActivTrader platform, 67 percent of traders are bullish. With the current sentiment bias towards copper, I believe more short-term downside in the red metal seems the most likely scenario.
Copper Short-term Technical Analysis
The four-hour time frame shows that copper has challenging its short-term bullish bias and is now started to move back towards its key 200-period MA, around the $370.00 level.
It is also noteworthy that a bearish head and shoulders pattern with a $20.000 downside projection is close to be activated. The $350.00 level would be the obvious target.
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Copper Medium-term Technical Analysis
The larger picture for copper prices remains bearish because the red metal has been rejected from its 200-day moving average, which is a key benchmark of medium to long-term strength.
At the moment the price of copper is also trapped within its lower long-term range. Those with a keen eye will also see that the $390.00 level is key for further upside.
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