FxWirePro: Buy Copper targeting $3.2 per pound

We at FxWirePro previously backed away from our short call in copper and twice. Once the red metal broke above $2.3 per pound and when it cleared a resistance around $2.71. In both the cases, the losses were relatively small. We refrained from going long in copper as we feared the China scenario, where a slowdown in the Chinese economy and burst of its trillion dollars of corporate debt would invariantly lead to a consumption slowdown affecting the red metal. China remains the biggest importer of the red metal to this date. Over the past years, this scenario has shown promises of surfacing several times but ultimately failed to materialize.

Now, the current scenario of increased infrastructure spending in the United States, continued demand from China, and a slowdown in supply over the strikes at Escondida mine in Chile is forcing us to change our outlook, at least in the short to medium term.

The price of copper has now reached $2.79 per pound and is the highest level since August 2015. We suspect that more juice is left in this run and we expect the copper price to reach as high as $3.2 per pound over the short to medium term. For this trade, we would prefer a larger stop loss for now; at $2.43 per pound.  $2.6 per pound is likely to act as a key support to the price. Expect $2.9 area to act as a crucial resistance.