Copper prices had a strong showing in Monday’s trading session, and have built on that bullish response with a slight gain this Tuesday.
Traders have generally been very cautious this Tuesday because of the US Presidential Election and the uncertainty surrounding the outcome. However, risky assets made a comeback this Tuesday, although the gains posted in copper prices have been moderate when compared to other risky assets such as crude oil and the Aussie dollar.
Copper prices are responding to the positive manufacturing PMI data from China and the US. The ISM Manufacturing PMI data from the United States showed a rise of 59.3, which was better than the 55.6 and 55.4 consensus and previous numbers. Similar data from China also showed an improvement in the economic conditions surrounding manufacturing in that country.
Factory activity in China has accelerated at the fastest pace in nearly ten years on the back of surging domestic demand. This is fuelling demand for copper and has helped the red metal recover from its March lows.
Price on charts is now testing the key resistance level at 3.0920. A successful break of this price level allows bulls to pursue the next upside target at the 3.1255 resistance. 3.1865 represents the 2020 highs achieved a few weeks ago, and this target could be next in line if copper prices advance furiously.
On the flip side, a rejection at current resistance allows the opportunity for a pullback to the 3.0275 support. This move converts the price action of the last month into a head and shoulders pattern, with the neckline at 3.0275. A breakdown of this level completes the pattern and opens up the pathway to a downside projected move towards 2.9510. However, attainment of this price projection target requires that sellers take out 3.0010 and 2.9795 along the way.
