Bulls took advantage as Chinese investors were absent due to their week-long Lunar New Year celebration. Copper was able to rebound on Wednesday after weathering a cumbersome fall the previous session.
Last month, Chinese funding helped rout copper on the market and sent prices for the metal on a downward spiral to their lowest in 5½ years. Worries were high as China’s slowing economy and gushing copper inventories took their toll. “Yesterday the selling was coming from the Far East, but they’re not around at the moment. The price was ramped up through resistance, and that set off stop-loss buying,” as reported from one trader.
Copper prices recovered around 8 percent since their January lows after three-month copper on the London Metal Exchange (LME) rose 2.2 percent to $5,775 by 1505 GMT after falling 1.7 percent in the previous session. This is a good sign being that the metal commonly used in construction and power has dropped 9 percent this year so far. “Prices sold off yesterday and are still recovering,” said Commerzbank analyst Daniel Briesemann. “Liquidity is very low due to the Chinese players being absent. It will be this way until the Chinese customers come back into the market.”
Copper is stuck in a $5,300-$5,800 trading band and has been for the past month. Trader aren’t expecting much to change until trade returns to China after the Lunar New Year festivities have come to pass. Chinese markets won’t be reopening until the 25th of February. “With the level of speculative shorts having reached such an extreme recently, it is likely that a major deterioration in the global economy is needed for copper to make material new lows this year,” said Guy Wolf, Global Head of Market Analytics at Marex Spectron.
