The price of copper has started to soften under the $400.00 level following recent poor economic data from the world’s two largest economies, which are America and China.
Firstly, the March Caixin China General Manufacturing Purchasing Managers’ Index fell to 50.0, right on the cusp of levels that would indicate retraction and problems for the health of the Chinese economy.
Then the US March Institute for Supply Management (ISM) Manufacturing Index fell to 46.3, the lowest since May 2020. This was a shock for the market as it underscored the fragility of the global economy.
Also, this is the fifth straight month of declining US manufacturing activity, providing more ammunition to analysts predicting a recession, and also showing the challenges that lay ahead of policymakers.
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 extremely bearish, with retail appearing to be caught on the right side of the trade recently, we need to be careful of a sudden bounce in copper after the recent Chinese data.
According to the ActivTrader platform, some 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 $415.00 support level.
It is also noteworthy that a bearish triple-top pattern has formed, and notable lower highs are seen on the chart. The invalidation of the momentum divergence could be very encouraging for bulls in the short-term if the price moves above the $414.00 level.
Copper Medium-term Technical Analysis
The larger picture for copper prices remains bearish because the red-metal is now testing back towards the bottom of large broadening ascending price channel.
At the moment the price of copper is testing mid-range of the pattern, with these patterns previously being known as bearish style reversal patterns due to the rising shape.
I would suggest keeping a close eye on the $390.00 level for further breakout towards back towards the $375.00 level, which is the bottom of the typically bullish price pattern.