Copper futures jumped over one and a half percent last week, the biggest gain in three weeks. The retreat of the US dollar and further stimulus measures by the Chinese government supported the Hindu.
China said it would reduce its reserve requirement over the next two weeks, aiming to provide 1 trillion yuan of liquidity, and hinted at more monetary support in the near future.
The measures follow a pledge of 2 trillion yuan from foreign funds to mobilize a stock rescue package, boosting confidence in China’s industrial outlook.
The moves by Beijing were set to counter the increasingly weak demand due to the country’s economic headwinds, underscored by a 50% surge in deliverable stocks at major warehouses this year and a plunge in the Yangshan copper premium.
Prices were also supported by concerns that long-term supply would fail to keep pace with copper’s key role in electrification.
Adding to this, China central bank earlier this week announced a deep cut in the amount of cash banks hold as reserves and a Bloomberg report said Chinese authorities were considering mobilizing about 2 trillion yuan to stabilize a slumping stock market.
However, uncertainty around China economic recovery and a stronger U.S. dollar ahead of US FED policy this week may add volatility.
Technical Outlook
Copper prices enjoyed a recovery last week. Prices rallied from a low of 713.50 and peaked at 732.50 before settling at 729.50, up 1.63% on the week.
According to the outlook issued on January 22, 2024, the price of copper touched both forecast levels of 722.50-728.50.
The formation of a long rising candlestick indicates strong buying activity in copper prices. Additionally, prices are trading at major resistance at the 734.50 level in February on the chart above. Prices are trading above the 20-day moving average.
However, all the technical aspects mentioned above point to growth in the near future. So, a fresh buy could be seen above 734.50, the target was 738.50-742.50. Otherwise, any dip to 725-723 could attract buying activity.
On the downside, important support is below 717.50, prices may fall to 710.50-705.50
Commodity Samachar
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