FxWirePro medium term outlook: Copper likely to decline towards $1.6/pound

After its fourth failure attempt to break above $2.4/pound area, copper prices have declined to lowest level since February and more could be on the card. The red metal is popularly perceived as global barometer for growth, so weak demand globally isn’t helping the metal.

Moreover April data release from China showed that growth hasn’t picked up as much, when compared to China’s stimulus effort. China has already announced more than trillions of Dollars investment in infrastructure, similarly new bank loans in China has already crossed Yuan 5 trillion. This makes the situation scarier since it points to failure of stimulus to boost growth or sharp decrease in marginal productivity of capital.

On the supply side, most of the major producers have already reduced their cost level. In some cases to as low as $1.25/pound. Average cost as of 2015, has fallen around $1.44 per Pound production, which means supply likely to remain large.

As Federal Reserve, ready resume rate hike as early as June, both China and copper likely to face the brunt.

Trade idea –

Sell Copper at current price $2.06/pound and at rallies, with stop loss around $2.3/pound area and with targets around $1.75/pound and $1.6/pound area.