Copper
Copper price declined for the second successive week since the trend turned negative in the LME market in addition to the news that China plans to strengthen the management of both supply and demand sides to curb unreasonable increases in commodity prices and prevent the pass-through to consumers.
The reddish-brown metal ended the week with a loss of Rs 33.25 or 4.30 percent on the domestic bourse. The prices fell in three out of five trading sessions on the MCX.
Copper delivery for May slid by Rs 10.50, or 1.40 percent, to close at Rs 741.65 per kg with a business turnover of 2,425 lots. The same for the June contract tumbled by Rs 10.45, or 1.38 percent to Rs 746.85 per kg with a volume of 2,376 lots.
The value of May and June’s contracts traded on Friday was Rs 4,221.20 crore and Rs 991.21 crore, respectively.
“Supply concerns from Chile could not lift sentiment for the near term as LME copper from record all-time high of $ 10,749 per tonne experienced technical profit booking. For next week also there could be an extended decline in copper but looking at the overall fundamental of the copper market, we recommend to go for buy on dips,” said Jigar Trivedi, Research Analyst- Commodities Fundamental, Anand Rathi Shares & Stock Brokers
Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited, said, “We believe that the demand for the copper is coming down and supply are coming strongly and China’s efforts to curb raw material prices. Technically chart is weak and likely to touch 50 days SMA at Rs 720 regions.”
The US dollar fell below the crucial 90 marks against a basket of six rival currencies after hitting the low of 89.63, the lowest level since January 8. The dollar index ended with a loss of 0.35 percent at 90.01 for the week.
Fed for the first time spoke of tapering soon and raising interest rates in case the economy stats remain well above the targeted trajectory.
Chinese banks extended 1.47 trillion Yuan ($ 228.21 billion) in new yuan loans in April, down from 2.73 trillion Yuan in March and lagging analysts’ expectations of 1.6 trillion Yuan.
The Yangshan copper premium which reflects Chinese demand for imported metal, remain near the five-year low suggesting that physical demand remained weak. Currently, the premium is at $ 38.50/tonne.
However, softer dollar and worries about a strike in Chile limited the downside.
The union representing workers at Chile’s Escondida copper mine, the world’s largest, said on Wednesday it was preparing for a lengthy strike if owner BHP did not reach a fair and equitable deal in looming contract talks.
The base metal price settled with a loss of 1.05 percent at $ 9,904.25 per tonne in London.
Technicals
Sriram Iyer, Senior Research Analyst at Reliance Securities, said, “Technically, LME Copper on the weekly chart has formed a Shooting Star kind of Candlestick which is a sign for Bearish Reversal & could continue its Bearish momentum where support is at $ 9820-$ 9530 levels. Resistance is at $ 10120-$ 10330 levels.”
“Domestically, MCX Copper May on the weekly chart has formed a Bearish Shooting Star Candlestick where could see a Bearish momentum up to Rs 735-696 level while resistance is at 768-788 levels,” Iyer noted.
Outlook
Iyer believes that a lot of good news has already been priced into copper, as the market remained muted of potential impact for higher royalties and strikes in top producer Chile and a socialist party leading polls in Peru.
Additionally, curbs from China in the next few days or weeks could keep prices under pressure. So, some additional correction cannot be ruled out next week, he said.
Recommendation
“For the upcoming week, MCX Copper is likely to continue its bearish momentum towards Rs 720 levels. Traders may find the sell on rise opportunity in MCX Copper from the resistance around Rs 747-748, keeping a stop loss at Rs 752.70 to chase the target at Rs 720,” said Purohit.
Reliance Securities advises its clients to sell on rise May copper futures near Rs 755 with a stop loss at Rs 760 and a target of Rs 745.
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