Copper futures chart - 16th november 2010
December copper futures recovered some of the lost ground on Friday following the sharp sell off across the commodities sector, as rumours of a Chinese rate rise shocked the markets, which reacted violently to the possibility of a reduction in demand. Yesterday’s trading for copper was more positive, following the decision by the People’s Bank of China to keep interest rates on hold for the time being, despite the fundamental data last week which is pointing to rising inflation, raising the prospect of an economy that is beginning to overheat, and one which could have significant consequences around the world.
The feature of yesterday’s trading session was the support provided by the 14 day moving average, which helped the commodity close higher with a narrow spread up candle, and just failing to hold above the 9 day moving average at 394.75. Whilst the longer term outlook remains firmly bullish for the base metal, in the short term we need to see copper prices recover and hold above both the 9 and 14 day moving averages once again on the copper future chart, which would then place the December contract in a strong position to break above the 400 price point once more, and push towards the high of last week at 410. The 40 day moving average continues to point sharply higher to support this analysis.
From a fundamental perspective, copper remains one of the key materials in China’s economic recovery, and as such ( and much like soybean) the price of copper is extremely sensitive to any news, whether good or bad, eminating from China. However, despite the news last week, demand continues to remain very strong with the copper mines struggling to meet this demand, and until this dynamic changes, then copper prices are likely to continue higher for the foreseeable future. The recent short term recovery in the US dollar is adding some downwards pressure to commodity prices in general making exports more expensive as a result.
