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The price of copper continues to trade around the $480.00 level following recent mixed data economic data globally and rising fears regarding central bank actions and elevated rates.
Poor economic growth normally means lower copper prices. The fact that copper is falling or remains under pressure from a technical perspective shows the concerns of the economy.
Also, data last week showed that copper available to the market in London Metal Exchange (LME) approved warehouses fell to the lowest level since October 2021 after large amounts of inventory were earmarked to leave the LME system.
Total stocks of copper in LME warehouses stand at 80,400 metric tons. Of that 62.5% or 50,275 metric tons has been set aside or cancelled for delivering out over coming weeks. This is compared with 42% previously.
Cancellations can cause concern about supplies on the LME market and influence price differences between contracts along the maturity curve. When the market is worried about LME supplies, contracts with short maturities typically attract a premium.
Sentiment towards copper has been a big catalyst for copper prices. Sentiment towards copper is now bullish, with retail appearing to be caught on the wrong side of the trade recently.
According to the ActivTrader platform, 39 percent of traders are bearish. 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 only short-term bearish bias if copper continues to remain soft under the $385.00 level.
It is also noteworthy that the Ichimoku indicator does show the price of copper rallying above the Ichimoku indicator, however, there is no real buy signal until we see the Lagging Line crossing the cloud.
I suspect we will see the rally towards the top of the Ichimoku Cloud if we do start to see copper trading higher.
Copper Medium-term Technical Analysis
The larger picture for copper prices remains bearish because the red-metal is now testing back inside the Ichimoku cloud and the Lagging Line is still issuing a sell signal.
I would suggest keeping a close eye on the $380.00 level for a major technical reversal towards back towards the $400.00 level. However, the trend remains bearish now so selling rallies is still the play.
Also, trading inside the Ichimoku Cloud typically signals uncertainty, and technically trading inside the cloud is not usually a great idea, hence why we need to wait for a breakout from the cloud.
