XCUUSD Copper Futures Forecast: Forever Cheap?

XCUUSD Copper Futures Forecast: Forever Cheap?

I would like to start with a brief for the beginners:

What Drives the Price of Copper?

Copper has many uses in a diverse array of industries. Therefore, its price is a good barometer for the overall strength of the global economy. The following four areas represent the biggest determinants of copper prices:

Emerging Markets: Emerging Markets Because infrastructure represents such an important part of demand, emerging markets are a key driver of copper prices. Fast-growing countries such as India and China are accumulating vast amounts of wealth as their economies grow. As a result, they have a growing need for housing and transportation infrastructure and other types of construction. Not surprisingly, Asia comprises an increasing share of global copper demand. The price of copper may depend greatly on the ability of these countries, as well as other emerging economies like Brazil, to continue to grow. A growth slowdown in emerging economies will almost certainly have a negative effect on copper prices

US Housing Market: US Housing Market The US homebuilding industry uses copper in electrical wiring, roofing, plumbing fixtures and insulation among other things. Therefore, factors that affect US housing demand, including nonfarm payrolls, mortgage rates, US gross domestic product (GDP) and demographics, play an important role in determining copper demand. The building construction industry comprises almost half of copper use in the United States. Investors should pay close attention to trends in this market for clues about future copper prices.

Supply Disruptions: Political, environmental and labor issues can have a big impact on copper prices. South America produces a significant amount of the overall supply of copper, particularly in Chile and Peru. Historically, countries in this region have at times chosen governments that have nationalized the mining industry, such as in Bolivia in 2007. Such events can disrupt supplies and lead to higher prices. Events such as miner strikes can also produce supply disruptions and higher prices. Finally, events such as earthquakes and landslides can slow down mine output. Investors in copper should pay attention to geopolitical news and natural disasters that affect the mining industry.

Substitution : The economic principle of substitution represents a risk of investing in any commodity, and copper is no exception. As prices climb, buyers will seek cheaper substitutions, if available. Cheaper metals such as aluminum now substitute for copper in power cables, electrical equipment and refrigeration equipment.  Nickel, lead and iron also compete with copper as substitutes in some industries.

Fundamental Overview:

Low Inflation and slowing global economies,

Aging world economy and decreasing demand

Changing technology – Substutions –

Strong USD

Trade wars

and

Depending on global risks, the downward price movements of commodity prices may change direction as macro balances begin to change.

When we look at the last 40 years, copper prices are performing very low compared to the SP 500 index. One of the reasons is that developing technologies have the flexibility to switch from one commodity with a price increase.

On the other hand, easing central bank policies, budget deficits, political risks and corporate debts and bubles may cause the dollar to weaken in the medium term.

The weak dollar will make imports from overseas countries more expensive for US companies.

In Chile, the world’s largest copper producer, the lack of economic stability, domestic turmoil and strikes stand out as factors that may increase the cost of copper removal.

Before the upcoming US elections, the FED is expected to keep interest rates unchanged and continue the monetary expansion even covered QE program. This may support the commodity prices near term.

Although gold and oil have increased due to the geopolitical tensions between the US and Iran, Now; it may be Copper’s turn.

Technically:

Spot Copper prices ended the week at 283 Cent.  Copper prices broke the bearish trend of 2 years as seen on the chart.

We can clearly see the second rounded bottom formation is in progress. As seen on the chart; Bat Harmonic pattern is working now and 2.72 $ is the strong support level.

We plan to buy the potential pullbacks towards 2.78 $-2.76$.

Our targets: 2.88 2.92 2.97 3.02 and 3.06

Our Stop Loss: Daily Closing below 2.72

XCUUSD Copper Live Chart has been updated. We will follow and update the chart with intraday opportunities.

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