Copper price declined slightly today partly because of the strength of the US dollar. The dollar index, which measures the strength of the USD, rose by 20 basis points.
Demand and supply dynamics are at play in the copper price dynamics. On the one hand, data suggests that the Chinese economy is coming back. Earlier this month, numbers from Caixin and China Logistics showed that the country’s manufacturing activity bounced back in March. Another data mid this month showed that China’s exports and imports rose in the month.
China is an important country for copper prices because it is the biggest buyer. Still, there are signs that the demand for copper and copper-made products will decline since most of China’s trading partners are now struggling. Indeed, just last week, the IMF warned that the world would go through the worst recession since the Great Depression. This is a negative for copper prices, which tend to do well when the economy is booming.
On the other hand, supply has been constrained. For example, the number of coronavirus cases in Chile has risen to more than 10,000. This ranks it as the third country in Latin America. As a result, the surging cases means that the output for copper and other minerals will fall. This is because Chile is the world’s biggest producer of the metal. Other copper producers like Peru, Democratic Republic of Congo (DRC), and the US are also battling the disease.
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Looking at the four-hour copper price chart, we see a few things. First, the price has been on an upward trend since bottoming at $1.9785. Second, the price reached a high of $2.9635, which is along the important 61.8% Fibonacci Retracement level. This retracement was drawn by connecting the YTD highs and lows.
Third, the price has formed a double top pattern at this level also. Finally, as the price rose, it formed an equidistance channel, which is shown in green.
This means that copper price will maintain a bullish trend if it manages to move above the 50% Fibonacci level. If it does this, it will likely test the $2.4260 level, which is along the upper line of the equidistance channel. It is also above the swing high seen on March 17.