Budding Appetite for Risk Vaults Copper

The appetite for risk is increasing in an irregular manner from the disastrous start of the year. A sense that the Chinese economy might be slowing, but not imploding, helped the market feel more comfortable increasing its risk exposure. The recovery of copper is particularly encouraging because it suggests rising expectations that the world economy will continue to hum along.

Source: Thomson Reuters Eikon

Monitoring demand

Copper formed a medium-term inverted head-and-shoulders formation and the target of this bullish reversal pattern is the 2.3150 area. The left shoulder was established in late September, 2015, the head was formed in mid-January, and the right shoulder in mid-February. Copper then bulldozed its way through the resistance of its neckline at the end of February. Its recovery from an over six-year low was accelerated by copper’s falling inventory levels.

The rally is far from perfect. Copper put in a medium-term top on March 4, and since then it’s been seeking new impetus. But demand should persist for as long as the prices hold above the 21-day exponential moving average. Only a close below this average and below the neighboring 23.6% Fibonacci retracement at 2.1782 would spell trouble for the recovery of copper.