By IFCMarkets

Accelerating Chinese growth bodes well for copper

China’s industrial output and retail sales grew more than expected in August. Will copper rise as the world’s top copper consumer’s economy accelerates?

Economic data on Tuesday showed China’s industrial production rose 6.3% from a year earlier in August, after 6.0% growth in July. The retail sales also continued to grow, increasing 10.6% following a 10.2% rise in July. The gains in both retail sales and industrial output were better-than-expected, indicating China’s economy accelerated after slowdown in July as evidenced by lower Services and Manufacturing PMIs and employment. At the same time fixed asset investment continued to grow in August at 8.1% rate, supported by public investments. The continued growth in China’s economy, world’s biggest consumer of copper, is bullish for copper. At the same time, the reduced likelihood of a rate hike at Fed’s September meeting after Governor Brainard’s dovish comments on Monday moderated the gains in dollar, which is also a positive development for commodity demand. September Manufacturing and Services PMIs will be released September 30 and October 1.

COPPER:D1 is correcting upward in daily timeframe following a decline since July 13 after hitting four month high. The price iss rising toward the 50-day moving average MA(50).

• The Parabolic indicator has formed a buy signal.
• The Donchian channel indicates no certain trend: no slope has developed yet.
• The MACD indicator gives a bullish signal.
• The stochastic oscillator is rising but hasn’t reached the overbought zone.

We believe the bullish momentum will continue after the price closes above the upper bound of the downward channel and last fractal high at 2.11. It can be used as an entry point for a pending order to buy. The stop loss can be placed below the last fractal low at 2.0714. After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop loss level(2.0714) without reaching the order(2.11), we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Technical Analysis Summary

Market Analysis provided by IFCMarkets