Bears Take A Big Swipe At The Copper Price!
Copper Price: How Low Can It Go?
Copper producers just took another haymaker to the chin…
With the copper price sinking to new multi-year lows this week, miners like Freeport McMoran $FCX and Southern Copper $SCCO are no doubt feeling the pressure.
One look at a copper chart tells you all you need to know…
As you can see, the red metal recently broke to new 2015 lows under $2.25 a pound. The downturn has copper off a whopping 25% year-to-date and down 30% from last year at this time.
Clearly, bears are making their presence known in this market.
Why is copper crumbling?
It’s quite simple really.
China is the world’s largest consumer of the red metal, accounting for around 45% of global supply. And since the country’s economy is experiencing a rather steep slowdown this year, global copper demand has gone in the gutter.
Recent economic releases paint a relatively gloomy picture for China…
Just last week the People’s Bank of China (PBOC) revealed lending sank sharply in October. And that’s despite the fact the PBOC has cut interest rates six times in the past year.
But that’s just the start of it…
China’s October PMI manufacturing reading came in 48.3. While it’s a slight improvement over September’s reading, it still signifies the country’s vast manufacturing industry is contracting.
The culmination of months of weak economic data is precisely why China’s Q3 GDP reading recently registered at 6.9%.
To be clear, economic growth near 7% would be a fantastic windfall for Western economies. But for China, it’s the weakest growth they’ve seen in 25 years.
Of course, we can’t forget the impact of the US Dollar…
The world’s reserve currency is galloping higher thanks to the growing likelihood of higher interest rates come December. With the October jobs report coming in strong, it’s likely the Federal Reserve implements their first rate raise in over 10 years.
Without question, the copper market is facing stiff headwinds…
However, there’s a good chance bullish traders may be able to pull in some profits in the red metal soon.
Here’s how…
With the $2.00 technical support zone just a stone’s throw away, there’s a very good chance of some abrupt short covering soon. As a result, quick traders can look to the DJ-UBS Copper Total Return $JJC for a long opportunity.
But keep in mind, any short covering will likely be short-winded since the metal’s bearish fundamentals suggest it could fall to 6-year lows under $2 in 2016.
Until Next Time,
Justin Bennett
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.
Category: Commodity Trading, Copper
