The price of copper has started to soften under the $460.00 level following recent poor economic data from the world’s two largest economies, which are America and China.
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.
According to the General Administration of Customs, imports of unwrought copper and copper products to the Chinese economy fell 12.5% from the previous year in April.
The increasingly gloomy outlook is due, in part, to the ongoing contraction of China’s manufacturing sector. The Caixin General Manufacturing PMI dipped beneath market expectations from a flat 50.0 in March to 49.5 in April.
While firms reported stable export demand, domestic demand proved weak. Indeed, new orders fell for the first time in three months. Meanwhile, output rose only slightly as both input costs and selling prices dropped at the fastest rate in over seven years.
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 careful of a sudden bounced in copper after the recent Chinese data.
According to the ActivTrader platform, 41 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 a bearish head and shoulders pattern has played out, and notable lower are seen on the chart. The projection of the bearish pattern has played out which can hint at a rebound soon.
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 close to the bottom of the pattern, with these patterns previously being known as bullish style reversal patterns due to the rising shape.
I would suggest keeping a close eye on the $350.00 level for a major technical reversal towards back towards the $400.00 level.