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MCX copper: Reversal likely around 700

Share Written By
Rahul Gupta

Head of Currency Researchq

17 Jun 2021

The trend in MCX Copper has been bearish ever since it touched a life time high of Rs.812.60/kg in mid-May. Copper prices had surged as demand from China soared and COVID-19 hits supply from South America. China’s manufacturing and construction sectors consume around half of the world’s copper. So pick up in China’s manufacturing activity and strong recovery from the COVID-19 shutdown earlier in the year, supported the copper prices. The price of copper was also being supported by supply factors. The world’s two largest copper producers, Chile and Peru, faced severe COVID-19 outbreaks, temporarily closing the mines.

The rising copper prices had been hurting the Chinese consumers and began complaining. so China acted to cool down the commodity prices and potential inflation concerns. This pressed all industrial metals lower, weighing MCX Copper. The copper prices dropped after National Food and Strategic Reserves Administration said that China will release national reserves of copper, aluminium and zinc in batches in near term in response to the government's requirement of stabilising commodity prices.

This news led MCX copper to continue the downtrend and keep hovering around 714-715 mark. On downside, strong support is seen at 713/710 (Bollinger band's medium as well as key 61.8% Fibonacci Retracement level) and then at 700 (bottom-to- bottom trend line), post which broad range bound consolidation will be seen.

But, later part of this year, copper can rise particularly once the restrictions are lifted and industrial demand begins to rise for copper. In the long term outlook still remains positive, hence we can suggest buy on dip in staggered ways for long term buyers at around 700-680-650 levels. After the reversal from downside, resistance will be seen at 735-765-810.