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Fundamentals

Macro: Janet L. Yellen, U.S. Treasury Secretary, warned recently that if the two parties fail to reach a consensus on raising the debt ceiling, the U.S. will default on its debt for the first time since the founding of the nation on June 1, which will lead to massive unemployment, financial market shocks and weakening of the dollar. Meanwhile, Biden said that if the meeting with McCarthy, speaker of the House, breaks down again on the 12th, he will consider using constitutional amendments to bypass Congress and continue issuing debt. However, Yellen believes that this move will trigger a "constitutional crisis" and disrupt financial markets. Last month's data summarized that the US CPI increased by 4.9% YoY in April, slightly lower than expectations and the previous reading. Core CPI rose 5.5% YoY, unchanged from expectations.

Industry: China's passenger car retail sales reached 1.63 million units in April, up 55.5% YoY and 2.5% MoM, which is one of only two positive MoM increases since 2010. Retail sales of NEVs in April reached 527,000 units, up 85.6% YoY and down 3.6% MoM. Since the beginning of this year, the cumulative retail sales have reached 1.843 million units, a YoY r increase of 36.0%. According to the SMM survey, the operating rate of wire and cable enterprises in April 2023 was 85.53%, down 1.53% from the previous month and increasing by 19.26% YoY. It is expected that the operating rate of copper wire and cable enterprises in May will be 86.82%, an increase of only 1.29% MoM and 10.96% YoY.

Inventories: As of Monday, May 8, copper stocks in SMM's national mainstream area decreased by 0.07 million tons from last Friday, and 45,900 tons higher than the same period last year (May 9, 2022). The industry will enter a replenishment cycle in 2023, which will still have some support for copper prices.

Overall: U.S. employment data for April was better than expected, indicating that the U.S. economy is still resilient, and the hype of recession expectations will moderate somehow. Coupled with the gradual easing of inflation, it is also a stabilizing factor for copper prices. In terms of supply and demand, copper consumption has also weakened with the slowdown of economic recovery. The overall supply and demand have remained tight, but the pace of destocking has slowed down. The adjustment is the mainstay in the short term, and the pattern of high volatility may continue. In the medium term, the data is still under investigation for evidence of a deepening recession. However, the height of copper price rebound will be limited, against the backdrop of increased supply and negative macro neutrality. The copper price has fallen sharply in the short term, which has greatly released the risk sentiment. Bearish rather than short, activists can grab a rally at the key support level.

Technical Analysis

From a daily perspective, copper prices have found support near the March low after a deep correction in April, showing a double-bottom pattern, but still need the last rally to verify. Prices are entering the sideways currently, and the bearish mood has eased considerably. MACD has formed a death cross, with the opening having a tendency to narrow and turn around. Overall, the demand for the rebound after the overfall cannot be underestimated, and activists can take advantage of the dip to roll long.

Trading Recommendations

Trading Direction: Long

Entry Price: 8480

Target Price: 8700

Stop Loss: 8230

Support: 8400/8200

Resistance: 8650/8800