Copper Futures Higher in Early Trade on Inventories, Six-Year Low

by on May 26, 2014 8:57 am BST

Copper futures start the week higher for the third consecutive day on inventory data complied by metal exchanges in London. Refined-copper inventories declined to 282,645 tons last week, which marks the lowest level since 2008.

Copper reserves tracked by the Shanghai Futures Exchange (SHFE) dropped 4.5 percent to 92,652 tons, nearing December 2011 lows. According to the London Metal Exchange (LME), inventories ready for removal from warehouses declined below 100,000 tons for the first time since 2008.

Lian Zheng, analyst at Xinhu Futures, said “the momentum should continue unless China posts disappointing economic data again and concerns over China’s physical demand arise.” Zheng, also, commented that the multi-year lows in inventories are pushing copper premiums up, and the futures are moving higher in response.

Copper futures are trending higher in an ascending channel. Although, price action is currently snagged on the 200 daily EMA. It remains capped, currently, underneath price action resistance at $3.20.

Momentum is strong, with the ADX increasing, and the +/- DMI divergence is widening. Although, a pullback is probable if traders cannot firmly overtake both the 200 EMA and price action resistance. Potential areas of support at located at $3.16 and $3.135.

Strong inventory data will continue to support the trend. If resistance is overtaken, look for copper to trade to $3.217 before reaching higher resistance levels at $3.2385.

1D Chart of HG

1D Chart of HG