Copper prices rebounded back to over $3.50 per pound after falling below some minor technical support at $3.00 in mid-June. The previous surge to over $3.50 in May-June resulted in a bearish double top after copper failed to hold. Based on the price action, there is selling at $3.75 as the basis high grade copper on the COMEX is again facing some selling pressure.
Global demand remains healthy, albeit any signs of weakness in demand could send the metal down mercilessly. In the U.S., we are seeing a down trending housing market, a major user of copper. Also, a potential slowing U.S. economy could also drive prices lower.
An insatiable appetite for copper in China for its massive infrastructure buildup has helped to drive prices higher. So far, construction in China remains strong but the potential of rising interest rates there could take a bit out of demand.
There are some signs on the chart that high-grade copper may be topping. Taking a look at the chart, the September high-grade copper futures failed to hold at above $3.75 and are moving lower to potentially another retest of support at $3.00. The chart suggests the current hesitation in wanting to bid copper higher given the risk of a potential top.
The near-term technical picture is neutral as the Relative Strength needs to improve in order for prices to trend higher. Copper may be vulnerable to further selling in the near-term. Watch for support at the 20-day moving average of $3.40. Failure to hold here could see a move to $3.00.
The reality is, if the global economies slow, copper can take a major hit. Japan increased its interest rates for the first time in quite a while and China may also have to do so in order to combat the superlative growth and potential threat of inflation. Rising global interest rates could impact growth and ultimately the demand for copper.