Copper Market Tired As Prices Decline

Copper for May delivery is down marginally today at $4.20/lb. The market has fallen almost 10% in the last month and is very close to a 3-month low.

China’s Copper and related purchases in February declined 35% month over month. The country has been stockpiling Copper for months and declines are to be expected. Yet, the market has to figure out if it is a pause in Chinese demand or if it is a signal of slowing growth which could be the result of tighter monetary policy in the country.

The US Dollar index has strengthened in recent days after finding support at 76. At the least, the short-term trend has turned positive and that will impact Copper and the like. The Euro has turned back down amid renewed sovereign debt concerns as Spain’s credit rating was downgraded.

As we noted in our previous commentary, Copper had potential upside targets but it stalled out well below those targets. That suggests the market is tired and needs to fall in order to find a short-term equilibrium.

Turning to the technicals, we see that Copper failed at both $4.35 and now $4.25. The metal appears to have broken down but we should note the bullish hammer candlestick from today’s action. This reversal could give the market some legs. Beyond a short-term oversold condition, the market’s trend is lower. Longer-term charts show support at $3.80-$4.05/lb.


Jordan Roy-Byrne, CMT
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