Weekly Outlook on Copper - 20 October 2023

Copper, a crucial player in the industrial metal scene, witnessed a marginal 0.01% uptick, closing at 700.55. However, the excitement was tempered by soaring concerns over a substantial surge in copper inventories, hitting a two-year high of 191,675 tons in LME-registered warehouses. This surge in stockpiles emerged as the primary catalyst exerting downward pressure on copper prices.

Complicating matters further, China's economic indicators painted a mixed picture. Despite a 4.9% GDP growth in the third quarter, surpassing expectations and suggesting a tentative economic recovery fueled by recent policy measures, concerns persisted. The market found support in increased consumption and industrial activity in September.

Peru, the world's second-largest copper producer, contributed to the narrative with the Ministry of Energy and Mines reporting a 7.5% increase in copper production, reaching 223,178 tonnes in August 2023 compared to the same month in 2022 (207,588 tonnes). Sociedad Minera Cerro Verde played a significant role in this surge, marking a notable 10.8% increase and maintaining production levels above 36,000 tonnes throughout the year.

MCX copper is currently in proximity to the immediate support level of 693, following a breakdown of the Symmetrical Triangle pattern on the daily timeframe. The momentum indicator, RSI (14), standing at 37 with a negative crossover, signals potential further downside in the near term. Adding to the bearish outlook, prices are lingering below the 50*100 days Simple Moving Averages.
 

The market witnessed a notable -6.6% decrease in open interest, settling at 6,391. Given these indicators, the outlook for the coming days suggests a sideways to bearish movement in copper futures. Traders might consider a sell-on-rise strategy to leverage the anticipated momentum in the near term.

A breach of the 693 support level could pave the way for a downside move toward 685 and 680. Conversely, resistance levels are identified at 715 and 723 on the upper side.

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