The rally for copper finally came to an abrupt halt yesterday as weak economic trade data news from China dealt the base metal a mortal blow. Copper was sent plunging lower and closed the session with the wide spread down candle on very high volume, and signaled the end of September's rally.
The red metal was also doubly hit as China’s copper imports fell to their lowest level since 2015, with both zinc and lead falling sharply in tandem. It is against this backdrop that Chile’s regulators are currently preparing to bring charges against one of the largest copper mines in the country for the alleged mismanagement of water resources. If duly proved, this could result in its possible closure and consequent impact on supply.
Ironically for China, the PPI data revealed a pickup in prices, driven largely by increasing commodity prices with a consequent tickup in inflation data coupled with consumer prices. This is some slightly more encouraging news for the word’s second largest economy.
From a technical perspective the rally for copper failed to find any meaningful traction through the $2.22 lbs area, running into stiff price congestion above, and oscillation around the volume point of control in the $2.18 lbs area. Resistance in the $2.200 lbs added further downwards pressure. Yesterday’s price action also breached potential support in the $2.14 lbs area. With a low volume node below, we could see further downside pressure with a move back to test the lows of September in the $2.080lbs area in due course.