Copper has charted a series of higher troughs (HT), followed by higher peaks (HP). This puts the base metal into uptrend. Copper has found support at the 50% retracement, and may chart the next higher trough (HT?) in the series.
Copper and CHN50 Correlation
Copper's correlation started moving positively to the CHN50 around 5 Dec 2022 (green dashed vertical) and near lockdown relaxation. Since then, it has reached a correlation coefficient of +90%. This is a robust reading and, given that the base metal is a key input in production, not surprising.
In an earlier article, we highlighted the Chinese PMI beats. China's economy is rebounding steadily after relaxing its strict lockdown controls, and the increase in factory activity is at the fastest rate in over ten years.
This, and the strong correlation, suggest that copper's fate is intrinsically linked to the growth story coming out of China.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.