Copper is approaching the current year’s lows in a rather aggressive bearish trend. It began in mid-April, when, after a long consolidation, bulls didn’t manage to get over the key level at $3,000. At the moment, the quotes have come close to the line of a bullish long-term annual trend. If the chart gains the foothold above $2.710, it will be possible to speak about a change of the medium-term trend and open long positions with the following targets of $2.840, $2.880, and $2.960. On 4H chart the RSI oscillator shows the strongest bullish divergence, which began in early May. It predicts such a reversal.
However, the current downtrend must be broken up before we enter a trade. In case of breaking the annual trend line and fixing below $2.620, it is reasonable to open short positions with medium-term targets of $2,420 and $ 2,300.
From the fundamental side, the market is bearish in the long-term. The World Bureau of Metal Statistics (WBMS) published its data for January-February of the current year. The copper surplus in the market is 51 000 tons, compared to a 25 000 tons deficit for the entire 2018. In January, global reserves of the metal increased by 65 000 tons compared to the level of late December 2018. At the same time, copper production in January-February amounted to 3.3 million tons (a 0.6% decrease compared to the same period in 2018).
The WBMS estimates that global copper consumption for that period was 3.61 million tons (compared to 3.84 million last year). China, which is the main consumer of the metal, reduced metal consumption by 8.5% compared to 2018. A slowdown in the growth of the Chinese economy is likely to have an adverse effect on most metal prices, including copper. Also, the ongoing trade war between China and the United States will have negative impact on consumption.