Trade issues with China, a strong dollar, and rising U.S. interest rates have weighed on the price of copper which dropped from over $3.30 per pound in June to a low of $2.5520 in mid-August on the nearby COMEX futures contract. Since then, the red metal has traded in a range from $2.5645 to $2.8665 per pound.
When the dollar made a new high at 97.53 on the dollar index futures contract on November 2, copper fell to a higher low at $2.6625 the following day which turned out to be a sign of strength for the industrial metal. Copper has a long history as a barometer for the health and wellbeing of the global economy. After the dollar backed off from its latest peak, the copper market moved back to the $2.80 level as it appears to be setting up for a test of the high end of its trading range.
There are many ways to invest or trade in the copper market. The shares of copper producing companies offer one alternative, but the forwards and futures that trade on the London Metals Exchange and COMEX are the most direct route to participating in the price action in the nonferrous metal. The iPath B Bloomberg Copper Total Return ETN product (JJCB) tracks the price of copper, but it has yet to build the critical mass necessary to make it a useful tool.
Copper makes a move last week
Very quietly, the price of copper moved higher in four out of five sessions has been as the red metal headed back towards to top end of its trading range since late September.
As the daily chart of December COMEX copper futures highlights, the price of the red metal touched a low of $2.6425 per pound on November 1 and put in a bullish key reversal trading pattern on that day. After trading to a high of $2.8235 on November 5, the futures dropped back to $2.6625 and rallied for four consecutive sessions last week settling at $2.7985 per pound on Friday, November 16. On November 19, the price of copper was around the same level. The price momentum indicator and relative strength are close to neutral territory, but both metrics are leaning higher. Open interest, the total number of open long and short positions in the COMEX futures market has been holding steady around the 240,000-contract level. Copper moved back to the top end of its trading range late last week.
Technical resistance is within reach
Copper worked its way back to within striking distance of a critical level of technical resistance last week.
As the weekly chart illustrates, copper broke its pattern of higher lows and when the price broke below a succession of lows back in early July. One of the most significant technical support levels was at the mid-September 2017 low at $2.8750 per pound. When copper dropped below this price, the support became resistance.
Copper dropped to a low of $2.5520 in mid-August, and during an attempt to a recovery, the price rose to a high of $2.8665 on the continuous contract on COME in late September and early October and $2.8710 on the December futures contract. The high was just shy of the resistance level, but the red metal failed and moved back below the $2.65 per pound level. Now, copper is threatening to challenge the upside technical level once again as the market will turn its attention to South America.
The meeting in Argentina could set the stage for a rally in copper and other industrial commodities
When Presidents Trump and Xi meet at the G-20 meeting in Buenos Aires, Argentina this month, the world will be waiting for news on developments on the ongoing trade dispute between the U.S. and China. The Trump administration has sent mixed signals on the current state of negotiations and the President