Copper price, inherently linked to the state of the Chinese economy, continues to claw back on the steep losses suffered earlier in the year after China’s GDP came in at levels that were not as bad as feared. China’s GDP reading for the January to March 2020 quarter when compared to a year ago came in at 6.8%, which was slightly worse than the expected figure of 6.2%. Despite the downbeat data, analysts believe that the worst may be over for China and that recovery could be in the works.
IMF GDP predictions for China are for full-year GDP to come in at 1.2% in 2020 and 9.2% in 2021. Standard Chartered projects the 2020 and 2021 full-year GDP to register at 2.5% and 7.5% respectively, while ANZ sees the figures at 1.8% and 7.9% for 2020 and 2021 respectively.
These optimistic projections continue to lift copper price action as investors hope for a quick recovery, even as China slowly resumes economic activity that was suspended at the height of its domestic coronavirus situation.
Download our Q2 Market Global Market Outlook
Copper price’s recovery moves are occurring within the context of an ascending channel, with today’s price bouncing off the horizontal support at 2.30297 as well as the lower channel trendline.
Immediate resistance lies at 2.41116, which is the location of the 50% Fibonacci retracement from the swing high of 16 January 2020 to the swing low of 19 March 2020. This price level is also the peak seen on 17 March. A break above this level has the potential to target 2.49154 (lows of 26 August 2019 and 3 February 2020) and possibly the 3rd October/10 February lows at 2.53518.
On the flip side, resumption of the downtrend has to wait for a test of 2.41494 to see if price is rejected by the upper channel border. This price rejection could send copper price towards the lower channel border, where a breakdown makes for a full scale bearish trend resumption towards 2.30297.