We take a close look at key base metal, copper, in this week’s commodity dissector. The spot price of copper traded on London Metal Exchange (LME) is considered for this analysis. The spot price is quoted in USD/MT (metric tonne). LME copper spot ended at $7724.5 a tonne on Friday.

Long-term view

LME copper spot bottomed out taking support in the zone between $2,750 and $3,000 in December 2008. It has been on a long-term uptrend since then. However, the metal encountered resistance at around $10,000, registering an all-time high at $10,179 levels in February 2011.

This level is also a key psychological level. Since then it has been on an intermediate-term downtrend.

Nevertheless, as long as the copper trades above its long-term support zone between $6,000 and $6,250, its long-term uptrend stays in place.

A decisive downward breakthrough of this support zone can pull the metal down to $5,000-5,250 range in the long-term. On the other hand, strong rally above the long-term resistance at $8,700 levels will pave way for a rally to $9,250 and then to $10,000 levels in the long term.

Medium-term view

The metal found support at around $7,000 levels in late 2011, following a steep fall. Since then, copper has been on a broad sideways consolidation phase in the wide range between $7,000 and $8,700. Within this range, the commodity has key supports at $7,600 and $7,200 levels and resistance at $8,000 and $8,300 levels. In February, copper fell steeply breaching its 50- and 200-day moving averages and is hovering well below them.

Short-term trend is down for copper. From its February peak, the metal has declined 6.5 per cent and year-to-date the metal has declined 2.3 per cent. But it is trading above important support at $7,600 levels. A strong decline below $7,600 will reinforce bearish momentum and drag the metal price down to $7,400 and then to $7,300 in the short- to medium-term. Next, significant support is positioned at $7,000.

Copper needs to emphatically rally above $8,000 levels to alter its shot-term downtrend and take the metal price higher to $8,300. A conclusive move above the upper boundary at $8,700 is required to strengthen bullish momentum on the metal.

> yoganand.d@thehindu.co.in

comment COMMENT NOW