What?
Copper was slightly lower last week, but managed to hold its own fairly well, said Kathleen Brooks, Research Director at FOREX.com. The metal has fallen sharply since the start of February, but the pace of losses has started to slow as it gets closer to lows of $3.28, last seen in June 2012.
Why?
Copper has fallen along with other commodities in recent months. It started its decline back in February, along with the Euro, suggesting that part of the reason for the sell-off in copper has been the rise in the dollar. Since copper is priced in dollars, when the dollar gains in value the price of copper tends to fall.
What next?
It’s important to watch both fundamental and technical factors when it comes to copper, said Brooks. From a technical perspective the decline below $3.50 was a very bearish development, which opened the way for a sharper decline back to $3.28 and then to $3.00, the 2011 low.
From a fundamental perspective, copper is a good gauge of risk sentiment, so if global growth tapers off this year, especially in the US and China, then the metal will continue to decline, she added.
What to do?
“We think that copper remains a sell,” said Brooks, “If we get back to $3.40 we could see investors start to establish further short positions [on the expectation that the price will drop]. We would target $3.28 then $3.20 by the third quarter”.
