The price of copper has been staging an impressive recovery this week alongside other precious metals, due to improved market sentiment and the notion that the FED will not be announcing QE taper this week.
Vert soft macro data from China last week raised concerns that the world’s largest consumer of copper and many other commodities, is struggling to sustain its recovery. Due to these macro concerns, the price of copper momentarily fell below the $4.00 level last Thursday:
The 200-day average provided strong support, and caused copper to bounced strong, raising hopes of potential meaningful price bottom forming, a false downside breakout or even a technical double bottom.
Notably, the path of least resistance has been to the downside this summer, and this does look to be somewhat of a coin toss in regard to whether copper can recover due to the fact that China is now starting to slowdown.
Looking ahead, the second estimate for US GDP and FED Chair Jerome Powell speaking at the Jackson Hole symposium are the next big market mover for copper. Upcoming Chinese GDP data will also be very important for copper price.
Sentiment towards copper has been the biggest risk in the market over recent months as the market turned heavily bullish towards the red metal. The herd has now flipped to net neutral, which suggest a range of $400.00 to $450.00 is possible.
According to the ActivTrader platform some 54 percent of traders are bearish towards copper. With the current sentiment bias towards copper, I believe swing and range trading in the red metal remains the likely scenario.
Copper Short-term Technical Analysis
The four-hour time frame shows that a large, inverted head and shoulders pattern has formed, with bullish needing to hold the price above the $420.00 level to keep the pattern intact.
It is also noteworthy that a much larger bullish pattern could form if the price moves towards the $440.00 level. If this pattern does form, the $480.00 level is the next upside target.
Copper Medium-term Technical Analysis
The larger picture for copper prices remains uncertain unless we see a valid double-bottom pattern form over the coming week or a quick recovery to a new all-time high, close to the $470.00 area.
I am encouraged by the fact that the Commodity Channel Index indciator shows that copper has bounced after being very oversold technically, meaning it cold be a good time to buy copper over the medium-term.