As copper prices hit 10-year highs yesterday, two sets of contrasting opinions have hit the market this Tuesday. On the one hand is OCBC Bank, whose strategists are predicting a new record high within the current super-cycle. OCBC cites exceptional end-demand from China and decade-low inventories as the prime factors that could initiate the breakout move. OCBC also thinks that the increasing demand for the adoption of electric vehicles will be a supportive base for copper.
In contrast, Senior FICC Technical Analyst at Commerzbank Axel Rudolph feels that the current upswing is unsustainable and that a correction is due in the short term. He cites the extremely overbought daily RSI levels (15-year peak) as a technical factor that could provoke a correction this week or next. However, the bank retains its medium and longer-term bullish view, which sees copper targeting February and August 2011 highs.
In the meantime, a leading Presidential Candidate in Peru has declared that he would make the government the primary owner of copper resources in the country if elected. Peru is the second-largest producer of copper in the world. Yohny Lescano, currently 2nd in polls, has said he intends to seek equitable prices for copper, claiming that the mining companies “give ridiculous prices”. If elected, his copper policies could also impact copper prices down the road.
Copper is up 0.25%, but has given up some of the day’s gains as it met resistance at 4.2015.
The measured move from the bullish pennant pattern on the daily chart appears to have been completed. This is because the active daily candle has hot resistance at the 4.2015 price mark. With the previous candle also meeting resistance at the same spot, a rejection and pullback seems likely. This could allow for a dip towards the 3.9970 price mark. Further support is seen at 3.8340 and 3.7945.
On the flip side, copper prices would be primed to target new all-time highs if bulls can break the 4.2015 resistance as well as the 4.2755 resistance. This may occur from a subsequent retest of this area after dip buying at any of the support levels mentioned above. The steep nature of the pennant’s breakout move favours a correction in the short term, as pointed out by the Commerzbank analysts.
