The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
This short-covering activity has pushed the price of the red metal up to 295 cents per pound. Last week copper lost over 4.8%, suffering its worst-performing week in 11 months, but the financial markets do not move in straight lines and it is not surprising that the metal is higher today. Last week’s selloff was triggered by weak economic data from China, when declining exports and industrial production confirmed traders’ suspicions that the country is slowing down.
While Chinese economic data continues to slide, the situation in its credit market also continues to deteriorate. The People’s Bank of China (PBoC) has been forced to intervene and ensure the lines of credit between banks run smoothly. The more the PBoC loosens monetary policy, the more speculation will ramp up that China is depending too much on credit.
In the short term, we could see copper head towards the 200-hour moving average level of 304 cents per pound. If the foreign direct investment figures from China due for release overnight disappoint, we could see copper slip below the 294 cents per pound mark.