Copper Facing Bottom of the Range, As Commodities Fall on China Worries
Copper continues to remain in a bullish trend on larger timeframes as the lows get higher, but this year the price has been trading in a range, after the crash in the first half of 2022. At the bottom, we have seen the 200 SMA (purple) act as support on the weekly chart last year and earlier this year. Although at the top the 200 SMA (green) is capping the price and three weeks ago we saw a reversal, so Copper is heading to the 200 SMA again and is pretty close now. The decline in Copper prices initially occurred due to concerns that additional U.S. interest rate hikes might be necessary, following the publication of the Federal Reserve’s meeting last month and the FOMC minutes this week reinforced that bias.
Copper experienced an increase in value throughout June and July due to optimistic expectations of increased stimulus measures from the Chinese authorities to help the economy. However, its value declined again as China has disappointed expectations, with the sluggish implementation of government initiatives. The bullish momentum was limited by a stronger dollar index as well, which reached a two-month peak. This resulted in commodities priced in US dollars becoming more costly for individuals holding different currencies.
Although yesterday, Copper prices rebounded after hitting their lowest point since early June. This rebound was in line with the recovery of China’s primary metals consumer currency, which was bolstered by support measures. These gains were a result of China’s central bank injecting additional liquidity into the market to bolster financial assets, and significant state-owned banks selling dollars to acquire Yuan.
So, it looks like the weekly candlestick might end up as a doji, which is a bullish reversing signal. After all, we’re close to the 200 SMA where the price reversed in June. Commodity Dollars such as AUD/USD and NZD/USD have also been declining as a result of negative risk sentiment in financial markets. But yesterday they too showed some bullish momentum after news from China, so there’s a chance that we might see a bullish reversal if China gets in decisively.
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