Chapter 12 COPPER: Go Long Appropriately after the Expected Retracement（4.25）
Fundamentals
Macro: Current financial risks in Europe and the US and overseas geopolitical disturbances have improved significantly. In anticipation of the Fed's rate hike nearing its end, the US real interest rate level and the USDX show a trend downwards, weakening the suppressive effect on industrial metal prices.
Supply: The World Bureau of Metal Statistics (WBMS) reported that global refined copper production in February 2023 was 2,055,500 tons and refined copper consumption was 2,111,600 tons, leaving a supply shortfall of 56,100 tons. Meanwhile, affected by the reduction of large copper mine discoveries, mine development uncertainties of the long cycle, ore grade decline, and the world's major copper enterprises' capital expenditure decline and other factors, the release of new copper mines may reach the top in 2023, leaving difficulties for raising further copper production.
Demand: China's economy recovered significantly in the first quarter of this year, with data released by the National Bureau of Statistics on April 18th showing that GDP grew by 4.5% YoY in the first quarter of this year, a rebound that exceeded expectations. In addition, both industrial and service sector growth accelerated, and consumption continued to pick up, with Chinese domestic demand generally tending to recover.
Inventories: As of Monday, April 24th, SMM China's domestic mainstream copper inventories decreased by 6,600 tons to 176,900 tons from Friday, with total inventories of 62,000 tons higher than the 114,900 tons of the same period last year. Moreover, London Metal Exchange (LME) copper stocks stood at 53,100 tons, near their lowest level since 2013. The industry may enter a replenishment cycle in 2023, with some support for copper prices.
In general, the eurozone manufacturing PMI in April is worse than expected, plus the expectation of an ECB interest rate hike of 50 basis points, and a USD rate hike next week, resulting in a bearish oversea Marco, which is bearish for copper. Nevertheless, don't be overly pessimistic, as after this wave of retracement, copper prices have entered a more comfortable long position.
Technical Analysis
Regarding the daily chart, since February, copper has been running generally from 8550 to 9250, while the narrower range is 8700 to 9100. From the current price level, there is still space below but not significant, which could be the ending session for this retracement. For aggressive traders, it is recommended to go long with small positions near 8700.
Trading Recommendations
Trading direction: Long
Entry price: 8740
Target price: 9100
Stop loss: 8500
Support: 8650/8500
