It's joked that copper has a PhD in economics because of its ability to indicate macroeconomic turning points. This market terminology is because the base metal correlates with the economic cycle. I.e. its price rises in expansion when the industrial economy is doing well and falls as the manufacturing sector contracts in economic declines.
Therefore, its lower peak (LP) followed by the lower trough (LT) is noteworthy, because it has charted on a weekly scale. This time frame reflects the primary trend, influenced by the underlying fundamentals that drive the market. Mining Weekly reported that copper supply has increased and that demand has decreased.
"Aggressive US rate hike bets, lockdowns in China and a batch of poor economic readings from major nations have led to slowdown concerns and weighed on industrial metals."
Of concern, copper's stochastic remains weak, suggesting an underlying bearish momentum. Given Doctor Copper's reputation, if this oscillator reading is maintained, it is regarded as a negative macro indicator.
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.