Copper Rallies on More Signs of Rising Demand And Falling Supply

Copper rose considerably on Wednesday, surging to over three-week highs at $2.1278/lb. The rally was driven by positive economic data in the United States and China recently, and the covering of short positions in China ahead of the upcoming Mid-Autumn Festival in China.

Data from the Census Bureau on Tuesday indicated that U.S household income registered  a record growth rate in 2015 after years of stagnation. The median household income adjusted for inflation increased by 5.2%, or $2,798, to $56,516, from a year earlier, indicating the effects of sustained job growth in lifting the living standards of ordinary citizens who had been largely left behind by the recovery in the economy.

According to the report, the unemployment rate has declined from a peak of 10 percent in October 2009 to 4.9 percent last month, while income advanced by 4.4% to $57,200 in native-born households. The number of people living in poverty fell by 3.5 million to 43.1 million last year, pushing the poverty rate down to 13.5% in 2015 from 14.8% in 2014.

In China, a raft of economic data published this week contributed to signs of improvement in the world’s top copper importing country. Factory output, investment and retail sales all grew faster than expected in August, bolstering speculation of strengthening demand for the red metal.

On the Shanghai Futures Exchange, total positions in all copper contracts fell by 19,324 to 470,000 with trading volumes at 300,000 lots. Positions were closed by shorts while longs took no action due to the upcoming holiday between September 15-17. The Chinese market will be closed tomorrow and Friday for the mid-autumn festival.

Copper demand at the Multi Commodity Exchange (India) advanced by 0.19% for delivery in November and by 0.23% for delivery in February 2017 contracts. India ranks number 9 in the list of top 10 copper importers in 2015. The country signed an agreement with Chile last week to expand the India- Chile Preferential Trade Agreement (PTA), in which India has offered a concession to copper imported from Chile with a margin of preference of 50%. As copper is an important input for many sectors of India’s economy, the country expected the demand for this metal will soon grow beyond current domestic capabilities.

On the supply side, more mining firms in the Phillipine face potential mine suspensions under an environmental standard audit backed by President Rodrigo Duterte. The audit’s outcome will be issued on Thursday.

copper

Fig: Copper D1 technical Chart

Copper bounced off the support at 2.09000 after more than 2 weeks of trading around this level. The metal has broken out of the descending trading channel and also moved past the MA20 at 2.1005, having broken through it from below. The RSI index finally surpassed the 50-line after spending a long period of time under this threshold, confirming the current uptrend.

Trade suggestion

Buy Stop at 2.1280, Take profit at 2.1400, Stop loss at 2.1100

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