Weekly Outlook on Copper - 12 January 2024

Copper prices traded with modest gain, supported by a softer dollar and Chinese efforts to strengthen the yuan. The London Metal Exchange (LME) market's surplus in copper led to a noteworthy discount of $108 per ton over the three-month contract, marking a record high for the week.

Despite facing challenges such as weak demand from China and restrained growth in major markets, BMI, a unit of Fitch Solutions, predicts a small improvement in copper prices for 2024. Maintaining their average forecast at $8,800 per ton, BMI considers factors like supply constraints and a potential decline in the U.S. dollar strength, particularly if the Federal Reserve enacts rate cuts later in the year. December's data revealed China's copper cathode output at 999,400 metric tons, a 3.86% increase from the previous month and a significant 14.87% surge year-on-year. However, it fell short of expectations by 5,100 metric tons. The cumulative output for January to December stood at 11.44 million metric tons, reflecting an impressive 11.26% year-on-year increase, the largest annual gain in recent years.

Analyzing the technical aspects, copper prices currently hover close to the Trendline support and lower Bollinger Band on the daily timeframe. Despite trading below the 200-days Simple Moving Average (SMA), there is a notable proximity to the Ichimoku Cloud formation, indicating potential immediate support for the prices.

Looking at potential scenarios, if prices decline, the support for copper is recognized at 713, followed by 710 levels. On the flip side, resistance is anticipated at 724. A breakthrough above this resistance level could trigger a move towards testing 730, indicating a potential upward trend in prices. This technical analysis provides insights for traders and investors to make informed decisions based on the current market dynamics.

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