Money To Be Made Down Copperhead Road

Intermediate
  • Copper has been moving higher since November 1
  • The time based technicals are bright green once past Monday November 9
  • The U.S. political scene favours a softer Dollar
  • Look for prices to test U.S. Dollars 3.36/lb as a first staging post

“…You’d better stay away from Copperhead Road…”

(“Copperhead Road” Steve Earle )

There may be a degree of short term selling in copper, but the trend and sentiment will take prices higher. So, I cannot agree with the closing line of Steve Earle’s great song.

Copper Long and 12M
Copper Time Techs
Figure1: Copper Long History and 12-Month Chart  and Figure 2: Time Technical Sentiment. Source: www.investing.com, Spotlight Ideas

China Curtails Aussie Copper Concentrate

The copper price found support at the 50-day moving average as prices launched off here to  toy with new two-and-half year highs. A key driving force of the upward price momentum was news that Chinese smelters were actively looking to acquire concentrate on the spot market. They are doing so as China unofficially banned Australian copper concentrate imports.

Even though Australia only accounts for 5% of Chinese concentrate imports this development comes at a time where  supply chains are crimped by COVID-19 related disruptions.

Copper for delivery in December made gains for the fifth straight session, jumping more than 2% to a daily high of $3.1740/lb ($6,997 a tonne) before easing back to $3.15/lb at the close. It was a busy trading day as over copper valued at over $5.5 billion in total  had changed hands in New York.

Labour Disputes and a Declining Dollar

There may be a bout of short-term weakness in copper prices come Monday as the Chilean mine workers union announced it had secured an agreement on labour contracts to end the strike that had suspended most of the country’s copper production.

The U.S. Dollar declined for a third day to its lowest level in more than two years as Joe Biden looked increasingly likely to claim the U.S. presidency, subject to Trump’s unfounded legal suits.

  • (At 16:30 GMT on November 7, 2020 CNN called the election of Mr Biden)

The Dollar Spot Index fell as much as 0.9% to the lowest since May 2018 as the Euro rallied 1% and the Yen moved to its strongest level in eight months at 103.33. The Dollar was a safe haven asset, however, on Monday look for rising risk appetite, and as a result a weaker dollar.

This win will be the basis of much needed infrastructure stimulus which will benefit copper.

Copper 07-11-20
Figure 2: Copper Chart. Source: www.investing.com, Spotlight Ideas

I am looking to by any dip on Monday in the copper price. However, given the evolving landscape in the U.S. and the impact that will have on the Dollar, I will be a buyer anyway.

My targets ar 3.21 and 3.26 as the first two objectives. A stop will be set 3.09.

Macroeconomic Strategist

Stephen Pope is the Managing Partner of Spotlight Group. He has worked in the world of finance since 1982 and has performed d... Continued

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