What Does Dr Copper Say About the Global Economy?

Alan Penny

26 September 2019

3 min read

  • Choppy but still in a downtrend
  • Below two major moving averages
  • Likely to continue lower given enough time

Whether you know it or not, copper is one of the most important commodities to follow for those navigating the global markets. This is because copper is highly sensitive to economic headwinds and tailwinds as it is used in multiple situations, including construction and manufacturing. Simply put, the stronger an economy is, the more likely it is to need copper for a multitude of reasons.

Copper is one of the most important commodities to follow for those navigating the global markets

Longer-term downtrend

copper charts

Copper futures daily chart

The longer-term downtrend in the copper market is still very much intact, but it should be noted that the market has also been very choppy in general. Because of this, it has probably put quite a few traders to sleep out there, unless they are longer-term. The short-term back-and-forth type of range-bound trading has worked quite well in this market, but the one consistent factor has been that there are plenty of sellers willing to pounce on any signs of strength. This is a somewhat ominous sign for a lot of the global economy, as horrible economic figures in China have weighed upon the idea of growth.

Moving averages

There are a couple of major moving averages that are turning lower, or at least acting as dynamic resistance. The 200-day EMA is currently trading near the $2.70 level, while the 50-day EMA is just above current trading. The last several months have seen these two moving averages act as a bit of a barrier for the buyers to try to get above. With that being the case, it makes sense that sellers will continue to look at this as a potential tool.

The trade going forward

The trade going forward in copper is going to be a bit of a mixed bag, although it certainly looks as if the downside continues to be the favored trade for the overall market, due to there being plenty of concerns around the world to keep traders a bit bearish. In fact, quite a few traders will equate the copper market to China itself. Paying attention to the Chinese figures which have been getting worse is probably the best way to go, going forward.

Another thing to keep in mind is the latest headlines coming out of the US/China trade negotiations. While they have settled down a bit, the reality is that the United States and China are light years away from each other when it comes to the idea of working out some type of deal. As long as that’s the case, it’s very likely that copper will continue to find plenty of sellers. Currently, it looks as if the market breaking below the lows of last week opens up the door towards the $2.50 level. This is a large, round, psychologically significant figure that should offer some support.

Written By
Alan Penny

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