Copper price has lost over 15% of its value for the month of March. In fact, the sell-off in XCUUSD has pushed the commodity to trade at its lowest levels since 2016. For today, the metal is off to a bullish start in today’s trading as it is up close to 3.50% at 2.1545. Does this mean its previous lows will hold?
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There are two reasons for the uptick in copper price today. One, it is driven by dollar weakness. The Federal Reserve announced an open-ended quantitative easing program yesterday. This means that the central bank will buy unlimited amounts of government bonds as it injects cash into the economy. This is all in an effort to support economic growth which has been heavily affected by the coronavirus pandemic.
Secondly, there are reports that the province of Hubei will soon relax its travel restrictions. The province is the epicenter of the coronavirus because the first cases were recorded in its capital city of Wuhan. Since January 23, the city has been under total lockdown. This news is bullish for copper price because China is the world’s biggest consumer of the metal. The lockdown being lifted suggests that business activity may soon return to normal in the city. Consequently, this would also mean that demand for copper, which is often used in electronics, would also rise.
On the hourly chart, it would seem that copper price has broken resistance at the falling trend line. By connecting the highs of March 13, March 17, and March 20, it can be seen that the metal is trading above the trend line. This could suggest that there may be enough buyers in the market to push copper price to 2.2736 and test the 200 SMA for resistance.
On the other hand, a close below today’s low 2.0986 may invalidate this assumption. It could instead mean that copper price could soon retest last week’s lows around 1.9740.