Copper trading outlook: futures decline as China industry slows, EU and US data ahead

Copper futures posted losses with news that Chinese industrial output is slightly slowing. Investment and retail sales also marked minor slowdowns. Later this week data on industrial production in the EU is due, as well as housing data from the US.

On the COMEX division of the New York Mercantile Exchange, copper futures for settlement in July lost 0.57% to trade at $3.1315 per pound at 12:22 GMT today. Prices shifted in a daily range between $3.1220 and $3.1540 a pound. Yesterday the contract added 2.16% on speculation of improving investment climate in top-consumer China, nearing the highest price in two months at $3.1555 per pound.

China consumes about 40% of the world supply of copper, and a number of economic reports impacted the red metal today. Industrial production for April marked a slowdown to stand at 8.7% annual growth, falling short of the 8.9% expected expansion and behind last month’s 8.8% annual growth. Previously, reports on manufacturing activities registered contraction, and GDP for Q1 of 2014 was logged at the lowest level in 18 months.

Another major figure reported by China today was the reading on retail sales for the month of April, which also registered a slowdown. Consumer purchases have grown by 11.9% from a year before, down from a 12.2% annual increase in March. Previously, a report on consumer inflation for April showed prices had shrunk by 0.3% on a monthly basis, indicating sluggish demand.

Lastly, fixed asset investment for April had risen by 17.3% from a year before, behind the reading for March of 17.6% annual growth.

Negative findings recently fomented talks of a stimulus program by Chinese authorities. However, President Xi Jinping defused speculation over the weekend, as he said “the economy must adapt to a new normal… China is still in a significant period of opportunity… but must take timely countermeasures [to reduce potential negative effects],” he was quoted as saying, signalling limited actions are possible.

“The market is clearly not pricing in a hard landing for China,” said for Reuters Stephen Briggs, metals strategist at Societe Generale in London. “The data overnight brings us back to the reality that growth is slowing.”

Previously, information that China will be easing investment limits for listed companies in the foreseeable future boosted confidence in the economy, prompting a surge in stocks, which was followed by copper.

Elsewhere, the German ZEW institute reported business confidence for the next six months had deteriorated in May, logging at 33.1, down from Aprils 43.2. Elsewhere, reports on industrial production in the EU will be released later this week. Also, gauges for business conditions for New York and Philadelphia are due, in addition to crucial housing data.

Technical view

According to Binary Tribune’s daily analysis, in case Copper July futures manage to breach the first resistance level at $3.1753 per pound on Monday, they will probably continue up to test $3.2012. In case the second key resistance is broken, the industrial metal will likely attempt to advance to $3.2468.

If the contract manages to breach the first key support at $3.1038, it may continue to slide and test $3.0582. With this second key support broken, the movement to the downside will probably continue to $3.0323.