Chinese National Congress will be crucial for copper prices

The price of copper has been trying to regain its height since Monday, but new Chinese stimulus announcements will be necessary.

China’s National People’s Congress expected to be crucial for copper prices this week

The price of copper has been trying to rebound since the start of the week after retracing a large part of its gains from September in October. The copper pound rose to a three-week high on Tuesday and is about to return above the symbolic threshold at $4.45.

The price of copper has rebounded since the opening of the Chinese National People’s Congress on Monday. Investors are speculating on the announcement of new support measures for the Chinese economy, and more details on the tax initiatives already announced. Speculation was fueled by a media report indicating that China could consider a stimulus package of more than 10 trillion yuan (1.29 trillion euros) to reinvigorate the economy.

New announcements to support consumption and stabilize the residential real estate market would be the most positive for the Chinese economy and financial markets. Indeed, housing represents around 70% of the assets of Chinese families, consumer morale has been weighed down for more than two years by the unprecedented real estate crisis that China is experiencing. It must be said that property prices have fallen by 8% since their peak.

The real estate crisis is also affecting Chinese economic growth. Construction and sales of residential real estate fell by 50%, leading to a 30% drop in housing investment (as a % of GDP).

Copper Price Daily Chart – Key Levels

Resistance at $4.7 Will Be Crucial to Copper Price Outlook

From a technical analysis perspective, the copper pattern has improved significantly since the beginning of summer. The industrial metal managed to break out above a significant bearish slant line and then erase much of its decline from the spring and summer.

Copper prices could continue their rebound from earlier in the week in the near term, but the September high of around $4.7 per pound will be critically important to the underlying outlook. Exceeding this threshold would form an “inverted head and shoulders” pattern and given the length of time this pattern has been forming, this suggested the start of a major bullish reversal in copper prices.

A major rebound in copper would be a good sign for the global economy given the significant cyclicality of copper demand. So this would also be a good sign for risky assets.