Copper Continues to Takes Off, Will There Be A Correction Soon?
Nov, 22nd 17:15
Copper prices jumped 2% to a one-week high on Tuesday, powered by signs of tighter supply and renewed optimism that the world’s top two economies can sustain the metal’s demand growth.
Copper has been on a rally since late October thanks to reports that pointed to renewed acceleration of global factory activity, which suggests commodity markets are entering a cyclically stronger environment.
According to market sources, on the supply side, supply seems to be tighter than expected. As stated by a report by the International Copper Study Group, an intergovernmental industry body, global copper supply may turn to a deficit after recent periods of surplus.
In a bid to buoy the rally, the Chinese are buying up copper as a hedge against yuan depreciation. China’s yuan rebounded against the U.S. dollar but still hovered near 8-1/2-year lows. Not only has speculation over a December rate hike fueled the dollar, but Trump’s election win also helped the outlook for the greenback also remained bullish a over the past several days. To cool down the rally of metal prices in general, the Shanghai Futures Exchange said it would raise margins and trading limits on futures contracts including copper and other industrial metals.
Fig: COPPER D1 Technical Chart
Copper extended its gains to the second straight session, heading upwards to attempt the resistance at 2.5700. The rally seems limited as the market has still remained in the oversold zone. As indicated by the RSI chart which shown the index is at 75.49, a correction is much likely to happen.
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