Copper bulls will hope Biden can convince congress to back his infrastructure plans
Biden may have control of Congress, yet metal markets will be watching closely to see if he can turn that slim majority into approval for a huge green infrastructure spending package.
Biden holds majority, yet spending approval remains uncertain
Copper prices have been on an upward charge over the course of the past nine months with a huge expansion in Chinese industrial activity driving prices higher across the board. Today’s impressive 7.3% industrial production reading highlights the continued growth in Chinese demand for metals.
That reliance on Chinese demand may not necessarily need to remain in place to sustain this trend. UK, EU, and US are all planning major green infrastructure spending in a bid to future-proof economies and reinvigorate economic activity. With Joe Biden ultimately taking both sides of congress, we have seen hopes of a massive green infrastructure package grow substantially.
However, there is no guarantees that his wafer-thin majority in the Senate will carry his plans through. With the president-in-waiting due to be sworn in on Wednesday, his success or failures in early attempts to pass his coronavirus support measures will provide a key clue on whether his big-ticket items will pass or not. That will likely dictate near-term sentiment for metals such as copper.
Copper: technical analysis
The four-hour chart highlights the recent respect of an ascending trendline, with the price currently turning back towards a confluence of that trendline and the 7911 swing-low. Clearly the uptrend remains in place here, yet the recent failures are to break upwards to continue the trend of higher highs is a bit of a worry.
A breakdown below the 7911-7844 support zone would bring about a bearish reversal signal, raising the likeliness of a wider period of downside to give back some of the gains seen over recent months. It is unlikely such a move would be a long-term reversal, but it certainly would weaken the short-term bullish story. Until that break happens, there is still a good chance we see price turn upwards from here.
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