Technicals | Sep 25 2007
The rally in the copper market since the US Federal Reserve announced a cut in official interest rates last week has pushed the price of the metal to within sight of significant technical resistance levels, though in the view of Barclays Capital there is scope for further gains in the short-term.
It takes this view as the charts show few signs of any top forming, this despite daily momentum indicators having moved to overbought levels. Offsetting this is the fact the metal closed on its highs in Monday’s trading, suggesting further near-term gains.
The next level to be overcome in the group’s view is US$8,140 per tonne, which represents the trendline from the high of May 2006. While this may well be broken Barclays suggests further gains would likely be limited as further resistance would be encountered at the previous price peaks of US$8,210 and US$8,335.
A downward move through the open gap between US$7,590-$7,665 would be needed to warn of prices topping out, but in the group’s view the most likely outcome is a large triangular correction, with a longer-term test of the 2006 peak of US$8,800.
Copper closed last night in London at US$8076/t.
