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This is a follow up article to: Copper prices dip with fear of U.S. recession
Copper prices (Symbol: Copper-C) have demonstrated resilience this week, breaking a five-week losing streak as the market reacts to a mix of supply-side concerns and encouraging economic data from the US.
As of Friday, three-month copper was trading around $4.14 per pound, just shy of a two-week high achieved in the previous session.
Copper (Symbol: Copper-C) prices began the week with a softer tone, reflecting ongoing global economic uncertainties. Early trading saw three-month copper prices drop to $4.00 per pound.
Picture: Copper prices rise on supply risks and strong US data, as observed on the VT Markets app.
We look to the charts for guidance. The 1-hour chart for Copper-C shows the commodity trading at 4.1170 after reaching a high of 4.1449. The price action is facing resistance near the 4.12 level, as indicated by the horizontal dashed line. The EMA (24, 24, 72) is flattening, suggesting a potential consolidation phase.
The MACD indicator shows a slight decline in momentum, with the histogram turning red, indicating a potential bearish crossover.
If the price fails to break above the 4.12 resistance, it could lead to a pullback towards the support levels at 4.10 and 4.05. However, a successful breakout above this level may lead to a continuation of the bullish trend.
The primary catalyst for this recovery has been the labour strike at the Escondida mine in Chile. This mine is crucial to global copper supply, accounting for nearly 5% of the total output in 2023. Any disruption here could tighten the copper market, which is already sensitive to supply fluctuations due to the metal’s extensive industrial applications.
On the demand side, recent US economic indicators have provided a much-needed boost to market sentiment. Retail sales and employment data have surpassed expectations, reducing the immediate risk of a recession in the world’s largest economy.
Given copper’s widespread use in various industries, such positive data directly impacts its demand prospects, helping to stabilise and lift prices.
The recent bounce in copper prices suggests that the market is responding favourably to both supply concerns and improving economic data. However, traders should remain vigilant and exercise risk management, as the situation at the Escondida mine could evolve rapidly, potentially leading to more significant price swings.
Also, market focus will likely shift to upcoming economic data releases, which could either reinforce or undermine the current bullish sentiment.
