Very short term (1M):  Flat 
Short term (3M): Flat
Medium term (6M): Up
Long term (12M): Up
R1 9,632.50 July high
R2 10,000 Psychological
R3 10,747.50 All-time high
S1 9,372 20 DMA
S2 9,266 July low
S3 9,011 June low
 Edging lower

BB – Bollinger band
DMA – daily moving average
Fibo – Fibonacci retracement level
HSL – horizontal support line
SL – support line
MACD – moving average convergence divergence
DTL – downtrend line
UTL – uptrend line
H&S – head-and-shoulder pattern
RSI – relative strength index

  • LME copper bulls bought the dip near the 20 DMA this morning. 
  • But the upward price momentum is currently capped by the 100 DMA. Ideally, copper needs to trade above this level to maintain the current rebound.
  • The daily RSI and stochastic lines remain fairly neutral here and offer no directional bias. 
  • We will for now wait patiently on the sidelines and only act when LME copper's price action can tell us which directional bias it will take in the coming days.
Macro drivers
Risk sentiment in the London Metal Exchange base metals turned bullish in the early Asian trading session on Thursday July 15. Global investors remain confident that economic growth out of China is relatively robust even when second-quarter GDP growth data showed signs of slowing at 7.9% year on year, a plunge from skewed first quarter growth of 18.3%.

Last week’s surprise cut to the reserve requirement ratio (RRR) by 
the People's Bank of China (PBoC) has allayed fear of further slowdown. The base metals have responded well; it is important that follow-through buying interest is sustained throughout the day.

In his prepared remarks before Congress on Wednesday July 14, Federal Reserve chairman Jerome Powell said the US central bank can wait before starting to ease its bond purchases despite surging inflation.

Copper imports into China fell for the third straight month in June - higher prices, state reserves selling and slowing manufacturing growth started to bite. Yantai Guorun had begun unexpected maintenance on its smelter in Shandong.  

We are seeing mixed supply output. Copper-producing countries still face a major battle in to contain Covid-19. Copper concentrate supply from Chile was down by 1.04% in May - it produced 487,200 tonnes of copper, down from 492,300 tonnes in the corresponding month of 2020, national copper commission Cochilco said.

This was offset by improved base metals output from Peru - its copper output totaled 195,999 tonnes in May, up by 52.63% from 128,412 tonnes in the same month of 2020. Volumes also rose by 13.2% from 173,151 tonnes in April 2021.

At Fastmarkets, we expect the supply of copper concentrates grow 1.1% to 16.855 million tonnes in 2021, including a 3% disruption allowance. Without disruptions, the figure would rise to 4.3% growth at 17.377 million tonnes in 2021.

Metal held outside of LME-bonded warehouses fell for the third month in a row to just above 1 million tonnes in May, with the volumes of aluminium and copper falling by more than 10%. Copper stocks held outside the LME decreased to 59,164 tonnes in May from April’s 67,378 tonnes.

Even though LME base metals are broadly enjoying a rare strong start this morning, we are far more interested to see if the rebound is sustained into the close. A positive close could alleviate some of the bearish pressure, potentially acting as a platform for the rebound to continue.  

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.