Hopes of copper prices finishing 2020 on a high were dashed on Thursday, as a drop in China’s manufacturing activity ensured that the red metal would end the year close to the 2013 highs and well below 2020 highs.
Copper price on the XCUUSD pair fell 1.08% on Thursday after China’s manufacturing PMI fell more than expected. China’s National Bureau of Statistics reported that December’s manufacturing PMI came in at 51.9, which was lower than analysts’ estimates of 52.0 and also lower than the previous number of 52.1.
China is the world’s largest importer of copper, and China’s manufacturing activity data are seen as a barometer for copper demand, which is a primary driver of copper prices. The recovery in copper prices from the March/April 2020 lows stems largely from the ramp-up in demand from China’s whose industries opened earlier than expected after draconian lockdown measures helped to contain the coronavirus pandemic in the country.
China has also just approved its version of a coronavirus vaccine for public use, which could help push up manufacturing activity to new highs as more factories reopen and vaccinated workers return to work.
The 21 March 2013 high at 3.4895 is the immediate support for downtrending prices. This price level also acts as a neckline to the head and shoulders pattern on the daily chart. A breakdown of this level opens the door for copper prices to target a measured move towards 3.3150. This move would have to take out 3.3925 and 3.3220 along the way.
On the flip side, a bounce on the neckline allows copper prices to recover towards 3/5755, with 2020’s high at 3.6455 serving as additional resistance.
