Fundamental
Overview
The Chinese Politburo announced that it will adopt a
“moderately loose” strategy for monetary policy for 2025, which marked the
first major shift in stance since 2011.
Moreover, the language around fiscal policy was stepped up to “more
proactive” from just “proactive” in another sign that Chinese officials intend
to ease policies more forcefully to prop up the economy.
The market will now expect big rate cuts and asset buying, which should
support the copper market going forward. Copper is generally tightly correlated to the Chinese stock
market which shows the strong dependence of the commodity to the Chinese
economy.
That should not be
surprising given that China is responsible for more than 60% of global copper
demand. Overall, the picture is more bullish than bearish for the copper market
with global monetary easing likely leading to positive global growth
expectations.
The US ISM Manufacturing
PMI recently showed the New Orders index, which is a proxy for demand, rising
for the third consecutive month. The index has also jumped into expansion for
the first time since March. So, the stars seem to be aligning for a nice 2025.
Copper
Technical Analysis – Daily Timeframe
Copper Daily
On the daily chart, we can
see that copper is pulling back after bottoming out around the 4.10 level. The
price is getting closer to the downward trendline which is defining the bearish
momentum on this timeframe. We can see that we have also a strong resistance
around the 4.31 level for confluence.
That’s where we can expect
the sellers to step in with a defined risk above the resistance to position for
a drop into new lows. The buyers, on the other hand, will want to see the price
breaking higher to increase the bullish bets into the 4.70 level next.
Copper Technical
Analysis – 4 hour Timeframe
Copper 4 hour
On the 4 hour chart, we can
see that we had a very choppy price action in the past few weeks as the market has
been waiting for a catalyst to pick a direction. Today’s catalyst should push
the price into the major trendline and most likely provide an upside breakout.
If the price were to pull
back, we can expect the buyers to step in around the 4.18 level to position for
the break above the trendline. The sellers, on the other hand, will look for a
break lower to increase the bearish bets into new lows.
Copper Technical
Analysis – 1 hour Timeframe
Copper 1 hour
On the 1 hour chart, we can
see more clearly today’s rally on the Chinese news. The price made a new high
and it’s now consolidating between the 4.26 level and the top of today’s average daily range.
We can expect the buyers to
pile in around these levels with a defined risk below the 4.26 support to
position for the break above the trendline. The sellers, on the other hand,
will want to see the price falling back below the 4.26 level to target a
pullback into the 4.18 support next.
Upcoming
Catalysts
This week is going to be more tranquil on the data front. On Wednesday, we have
the US CPI report which is also going to be the main event of the week. On
Thursday, we get the latest US Jobless Claims figures and the US PPI.
