Copper price is down up for the first time this week as traders react to the US stimulus deal and the overall weaker US dollar. It is trading at $3.5180, which is slightly higher than the intraday low of $3.4700.
What happened: Copper price has been on a downward trend this week in part because of the risks posed by the new coronavirus strain. Because of its industrial nature, traders were pricing-in low demand for the metal as countries moved back to lockdowns.
However, overnight, France announced that it would allow trucks to and from the UK provided that the drivers have a covid test. Other countries could follow suit.
Copper is also reacting to the relatively strong GDP data from the United States. In a report yesterday, the Bureau of Statistics said that the American economy rebounded by more than 33% even as the number of covid cases continued to rise. This reading was better than the first two quarterly estimates.
Further, copper price is rising partly because of the overall weaker dollar. The dollar index, which is an important gauge of the currency’s strength, has dropped by about 20 basis points. Copper and the USD have an inverse relationship.
Turning to the daily chart, we see that copper price has been on a strong upward trend since March 18 when it dropped to $1.97. The price is above the ascending trendline that connects the lowest points in March, April, and October.
It is also above the 25-day and 50-day exponential moving averages while the Relative Strength Index (RSI) has moved from the overbought level of 80 to the current 58. Therefore, the metal’s upward trend will remain so long as the price is above the green ascending trendline.
However, a break below the 50-day EMA will send a signal that there are more sellers, which could see it continue falling.
