The price of copper has soared to its highest level since mid-2015 on strong economic data released from China – the world’s largest red metal importer – along with reports that China may put restrictions on imports of some scrap metal, including copper, from the end of 2018.

China’s GDP released last week, reading of 6.9% YoY in the second quarter of 2017, coupled with a growth in retail sales by 11% YoY in June which were all above economists’ median forecasts.

Adding to above, more than expected improvement in consumer confidence in July was reported. Moreover, some reports have been announced that the recycling branch of China plans to ban imports of scrap metal, including copper, according to Reuters. In response to this news, the copper price rocketed to hit an almost 3-years high around $7,000 last week.

But the bullish price action stalled in front of the 50% Fibonacci retracement level at the end of the week, caused by liquidating long positions by investors, following the recent sharp move. With overbought market conditions, prices are currently pulling back and can retrace further although the market still remains bullish.

Copper seems to be positioned at a critical level right now after facing the tough and psychological resistance at $7,000. The weekly chart below offers supportive indicators which are going to be explained further in the following.

cop1

To resume positive momentum in copper, the price needs to fluctuate above the most supportive zone of $6,500, overlapping a strong horizontal support, coupled with %38.2 retracement ratio of 2011 to 2016 high-low. This area is also overlapped by %38.2 retracement of last year’s low to high move.

The Gravestone Doji candlestick pattern formed last week suggests downside pressure in near-term sessions as momentum oscillators such as stochastic has also signs of overbought conditions in short term. We should note that the continuation of the negative pressures caused by stochastic decline from the overbought areas will postpone the bullish overview.

From the market timing perspective, we expect the bullish momentum resumes anytime in near future, as the time cycle of the rally has not completed yet, and the market has faced intra-cycle resistance so far. We believe the rally starting from the early 2016, will continue to hit fresh highs around $8,000 (%61.8 Fibonacci retracement $10,000 high to $4,000 low) during next 5 months. This bullish scenario should be considered valid, as far as the supportive areas of $6,500 and $6,000 accordingly are held.