Movements in the price of copper are heavily dependent on demand from emerging market economies like China and India. During times of economic growth, these nations demand large quantities of copper, the demand of which helps to increase the metal’s price. Alternatively, during economic downturns demand for copper drops, price tends to fall as well. Traders should be aware of this dynamic when trading copper.
In mid 2018, Chilean copper workers declared they would strike unless their increased wage demands were met. This significantly manipulated copper prices as the threat of a supply shortage may ensue, causing a surge to multi-year highs at the time .Copper has historically been regarded as a commodity without many investment benefits. The majority of copper trading was executed as a hedge against future price fluctuations to lock in a specific price.
This is where fundamental factors play an integral role in trading copper. Market participants who follow macroeconomic events such as the US-China trade talks would be aware of decreased volatility and intensity around the topic as it slowly dissolved. With this knowledge supplemented by a dwindling USD, the likelihood of copper prices rising in the near term would gain more traction. With prices respective of the 50% $2.
The next level of resistance would have been the 38.2% $2.79 per pound Fibonacci level whereby traders may look to exit long positions and look for possible reversals or an extension of the already strong bullish move. In this case, theindicator was useful as the 50-day MA crossed above the 100-day MA which is suggestive of a bullish price movement. This crossover appeared in mid January 2019 and with sustained supportive macroeconomic conditions, copper prices extended further.
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