Copper prices are falling as China’s government shows signs of slowing down

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Copper has been under siege in recent months as the Chinese economy has shown signs of slowing down. A test of an ascending trend line from the March 2020 low could be on the way around 4.28/29, with a break of the line still to come. The red metal is still facing headwinds, as data from China suggests that global commodity demand is decreasing. While these concerns briefly spread to global equity markets, commodities have been hammered particularly hard as Chinese economic activity has been halted by lockdowns and restrictions. Imports of oil, iron, and copper, all of which have recently gone lower, showed a weaker demand in July, according to customs data.

Copper is also at risk from the majority of advancements in the Delta Covid variety, as case counts continue to rise over the world. As China’s recovery normalizes and the Federal Reserve prepares to taper asset purchases, there are still headwinds in the shape of “peak growth” fears. A global slowdown might constrain near-term demand for copper and other commodities, limiting upside potential.

The recent adverse attitude surrounding copper may be exacerbated if China’s metal reserves are released in the future, especially if the US Dollar strengthens. Given the uncertainties surrounding the rest of 2021, market participants should be cautious when betting on bull and bear markets. Copper prices appear to be constrained in the short term within the triangle pattern’s borders, which have been in place since May. The price has declined to test the ascending trend line, following a test of the upper trend line in July. Given copper’s reluctance to break below this important support level, support in the 4.28/29 range slightly below present levels may be an appealing position for bulls. The 50-day moving average around the 4.37 range could act as resistance in the case of a near-term bounce.

Some of copper’s approaching trajectory may be determined by China’s economic conditions, which look to be diverging from those of Western countries. While bearish sentiment appears to be prevailing based on recent market activity, bulls may retake control if crucial support just below current levels is retested.