Commodity radar: Copper slides on China concerns, but expert suggests taking long positions. This is why

Domestic copper prices fell on Tuesday, following international market prices in early trade, amid concerns about a slowdown in manufacturing activity in key consumer country China. Additionally, a stronger dollar weighed on sentiment, with the dollar index hovering around 100 against a basket of six major currencies.The November copper contracts on the MCX were trading at Rs 1,004.10 around 11 am, down by Rs 5.10 per kg or 0.51% from Monday’s closing price. Meanwhile, the last recorded price of three-month copper contracts on the London Metal Exchange (LME) fell 0.3% to $10,855 per metric.

Commenting on current trends, Ajit Mishra, Senior Vice President at Research, Religare Broking, said the easing of copper’s upward move of late followed the disappointment surrounding Chinese economic data. However, demand prospects are improving in Europe, where car sales rose for the third month in a row in September, with sales of electric vehicles in particular up roughly 33%,” he said.

“Supply side issues are expected to persist after Anglo American warned that copper production at Chile’s Collahuasi mine is likely to be lower than expected next year, exacerbating a tight market. Participants, meanwhile, continue to watch for further updates to the US-China trade deal after negotiators reached some agreements on tariffs,” Mishra said.

Technical view

The weekly chart of MCX Copper shows a strong uptrend with prices currently around Rs 1,005 after crossing the major moving averages, indicating bullish momentum, Mishra pointed out.

“Momentum indicators confirm the uptrend, but the recent upward move may see a near-term correction. Immediate support is seen around Rs 995-998, with a similar resistance between Rs 1022 and 1025, a level that if breached could trigger further upside towards Rs 1040+ in the coming weeks,” the Religare analyst said.