Investment Idea

Dr copper is under the weatherer

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29 Jun 2022 | 1 min read
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Copper is considered a bellwether of economic activity, because of its widespread application in everything from home building to electronics. Hence the nickname “Dr Copper.” Given increasing concerns of, e.g., a US recession ahead, the copper price will be an important indicator to watch.

The copper price is down some nine per cent in 2022 but still has about doubled since the covid lows of 2020. In 2021, the price was fuelled by shortages and historically low copper inventories. Many pundits have a long-term bullish view as copper is a strategic resource in the electrification of economies and transportation. However, rate hikes and quantitative tightening in the US, a higher USD, as well as a risk for lower economic activity, are causing short-term headwinds for the commodity.

From a technical perspective, copper is in a negative trend below moving average MA 200 and is at risk of breaking down from a twelve-month consolidation and support level. There could be further volatility ahead.

Copper (in USD), daily 12-month price chart

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results

A decisive break down below levels of USD 4 per pound would spell bad news, with weekly Fibonacci Fib 50 retracement at USD 3.45 as a possible target. A possible silver lining could be the easing of the China lockdowns. Also, the price looks oversold with a possibility of a bounce back into the consolidation range (up to about USD 4.2, representing a Fib 23.6 retracement).

Copper price (in USD), June 2017 to June 2022

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results


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