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The price of copper continues to trade around the $460.00 level following recent mixed data economic data from the China this week, and mixed data from the world’s two largest economies, which are America and China.
Earlier this week Chinese PMI suddenly fell below 50.0 and hit 48.8 in May, which was below the expected 51.4 and the prior month’s reading of 49.2, further raising recession fears.
This pointed to a slowdown in the rebound seen earlier in the year in the second-largest economy in the world and a major export market for European companies.
To counter this, the Caixin China General Manufacturing PMI unexpectedly rose to 50.9 in May 2023 from 49.5 in April. Output rose the most in 11 months, new order growth was at 2-year high, and foreign sales continued to increase.
Chinese data is important as it the price of the red metal as Copper is a bellwether for the global economy. Poor economic growth normally means lower copper prices. The fact that gold and silver are rallying while copper is falling shows the concerns of the economy.
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, we need to careful of a sudden bounced in copper after the recent Chinese data.
According to the ActivTrader platform, 40 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.
Copper Medium-term Technical Analysis
The larger picture for copper prices remains bearish because the red-metal is now testing back under the Ichimoku cloud and the Lagging Line is 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.
