Copper Technical Analysis – The sellers are in control

Copper continues to be tightly correlated with what
happens in China, which is not surprising given that China makes up for more
than 50% of world imports. In fact, we saw how the stimulus hopes raised the
price of Copper, and weak economic data and lack of major actions from the
authorities depressed the commodity. Last week, the PBoC finally cut rates on
some key benchmarks but refrained to proceed in a similar way with other key
benchmarks this week. Overall, it looks like we can forget about a big economic
stimulus, and given the weakening global economy, Copper is likely to remain a
“sell on rallies”.

Copper Technical Analysis –
Daily Timeframe

On the daily chart, we can see that after the big
selloff from the 3.9575 resistance, Copper
has bounced on the key upward trendline and it’s
now near a resistance level. Moreover, we can see that the price is now testing
the red 21 moving average and we
are likely to see the sellers leaning on it to position for further downside.
Eventually, this major triangle pattern is going
to resolve on either side and what follows is generally a big and strong move.

Copper Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that Copper has
pulled back into a strong resistance area where we can find the 38.2% Fibonacci retracement level
and the daily 21 moving average. This is where we can expect the sellers to
pile in with a defined risk above the area to target a break below the major
upward trendline. The buyers, on the other hand, will want to see the price breaking
above the resistance to target a break above the downward trendline and open
the door for much higher prices.

Copper Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is diverging with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, if we get a pullback, the buyers are likely to lean on
the minor upward trendline and target a break above the resistance. Conversely,
if the price falls below the trendline, it will confirm the reversal and the
sellers will pile in to target a break below the major upward trendline.

Upcoming Events

This week is
pretty empty on the economic data side as we will only have the PMIs today and
the US Jobless Claims tomorrow. If the data surprises to the upside we might
see some strength in Copper in the short term, but the prospects of more rate
hikes might drive it down soon after. On the other hand, weak data should weigh
on Copper as global growth is already fragile with the economic problems in
China and weakness in the other major economies is not going to help. Remember
also that this is the Jackson Hole Symposium week, so we will hear from many
central bankers including Fed Chair Powell, who is set to speak on Friday.

This article was written by FL Contributors at Source