Copper: ‘Macroeconomic Woes’

Prices are expected to drift lower, impacted by prevailing economic apprehensions in China and Europe

January 01, 1970 5:30 IST | India Infoline News Service
Prices are expected to drift lower, impacted by prevailing economic apprehensions in China and Europe

Copper prices are poised to move towards the lows of US$7,000/ton, as macroeconomic numbers continue to reveal decelerating trends in China and Europe. In Europe, shrinking economic activity has aggravated concerns regarding diminishing demand for the non-ferrous metals. In China, markets participants are unimpressed with the gloomy demand scenario. In spite of the recent monetary easing measures by the country’s central bank, metals have been unable to derive any substantial support, as market focus is accentuated on the prevalent demand side of the balance sheet. We infer that easing monetary policy cannot abate the slowing trend in the Chinese economy to a large extent, as China’s largest export ally “Europe” is stuck in recession.

LME Copper – breach of key support of US$7,850 signals extended weakness

MCX Copper – Breach of Rs425 indicates a fall towards Rs415-408

Source: Metastock, India Infoline Research

Price-wise, intraday breach of key support level of US$7880 has given an early signal of a precipitous fall, which can aggravate the selling pressure and effectively test 2012 lows at US$7445/ton. Potential do exist for the prices to drift towards US$7,150/7,200 as long as prices do not close above US$7,675. In MCX, prices have broken the 61.8% retracement level of Rs425 and are turning lower. Prices could initially descend towards Rs417/415 and potential exists for the prices to decline towards Rs408 in the medium term. A visibly stronger USD/INR can lead to additional pressure on the base metals complex at the domestic front.

Price Outlook & Strategy
  Current price Trading range Sell Levels Target Stop loss
LME Copper US$7,810 US$7,200 - US$8,000 -- -- --
MCX Copper June Rs422 Rs408 – Rs425 423-422 415-408 429.5
Source: India Infoline Research, Prices as on 2nd March, 2012

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