The unexpected announcement of a dramatic increase in US copper tariffs triggered a bullish impulse in the copper price, which reached a new all-time high. The question is whether this bullish technical signal is reliable, or whether it could be a false signal and therefore a bullish trap. So let's review the technical analysis message on the price of copper (copper which is listed in New York) and take a look at the fundamentals.
1) 50% US tariff on copper imports!
President Trump has announced a 50% tariff on imports of this strategic metal, triggering an immediate price surge in the US and a pullback in the London-listed copper price. This decision is part of a wider move to reduce the country's dependence on foreign suppliers, following similar measures on other industrial metals. Faced with the prospect of trade barriers on such a scale, international traders rushed huge volumes of copper to US ports to protect themselves against an imminent surcharge. However, this rush has added to the confusion, as no one knows precisely when the new taxes will come into force, or whether certain companies will be granted exemptions. We must therefore remain cautious, as Trump's trade announcements are highly fickle, and the price of copper in the US could fall back if these 50% tariffs are not finally implemented.
It takes many years to bring new mines on stream and build copper processing plants, while imports continue to dominate the US market. This could exert sustained upward pressure on prices, penalizing the competitiveness of US industries.
At the same time, the timetable for implementation remains unclear. The Secretary of Commerce mentioned the end of summer as a likely horizon, but without detailing which types of processed or raw products would be affected. This uncertainty fuels speculation and maintains volatility on commodity markets. We therefore need to be fully aware of the speculative aspect of copper's behavior on the stock market at present, and therefore of the risk of false technical signals.
2) In terms of technical analysis, if the breakout is confirmed, bullish potential may be limited by the top of a long-term Chartist channel.
In terms of chart analysis, a bullish technical breakout has therefore taken place, with the overrunning of resistance at $4.70/$5. It remains to be seen whether or not this bullish technical break will be confirmed at the weekly close at the end of the week.
But if it is, the upside potential will be limited by the upper part of a long-term Chartist channel which runs towards the $6 price. If the market were to break back below support at $4.70/$5, then the bullish technical signal would be invalidated.
3) The relative strength between the copper price and the gold price should be kept under close watch
On the other hand, I would like to highlight the presence of major long-term support on the ratio between the copper price and the gold price.
The current bounce off this long-term support suggests that copper should outperform gold over the coming months.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
1) 50% US tariff on copper imports!
President Trump has announced a 50% tariff on imports of this strategic metal, triggering an immediate price surge in the US and a pullback in the London-listed copper price. This decision is part of a wider move to reduce the country's dependence on foreign suppliers, following similar measures on other industrial metals. Faced with the prospect of trade barriers on such a scale, international traders rushed huge volumes of copper to US ports to protect themselves against an imminent surcharge. However, this rush has added to the confusion, as no one knows precisely when the new taxes will come into force, or whether certain companies will be granted exemptions. We must therefore remain cautious, as Trump's trade announcements are highly fickle, and the price of copper in the US could fall back if these 50% tariffs are not finally implemented.
It takes many years to bring new mines on stream and build copper processing plants, while imports continue to dominate the US market. This could exert sustained upward pressure on prices, penalizing the competitiveness of US industries.
At the same time, the timetable for implementation remains unclear. The Secretary of Commerce mentioned the end of summer as a likely horizon, but without detailing which types of processed or raw products would be affected. This uncertainty fuels speculation and maintains volatility on commodity markets. We therefore need to be fully aware of the speculative aspect of copper's behavior on the stock market at present, and therefore of the risk of false technical signals.
2) In terms of technical analysis, if the breakout is confirmed, bullish potential may be limited by the top of a long-term Chartist channel.
In terms of chart analysis, a bullish technical breakout has therefore taken place, with the overrunning of resistance at $4.70/$5. It remains to be seen whether or not this bullish technical break will be confirmed at the weekly close at the end of the week.
But if it is, the upside potential will be limited by the upper part of a long-term Chartist channel which runs towards the $6 price. If the market were to break back below support at $4.70/$5, then the bullish technical signal would be invalidated.
3) The relative strength between the copper price and the gold price should be kept under close watch
On the other hand, I would like to highlight the presence of major long-term support on the ratio between the copper price and the gold price.
The current bounce off this long-term support suggests that copper should outperform gold over the coming months.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Penafian
Maklumat dan penerbitan adalah tidak dimaksudkan untuk menjadi, dan tidak membentuk, nasihat untuk kewangan, pelaburan, perdagangan dan jenis-jenis lain atau cadangan yang dibekalkan atau disahkan oleh TradingView. Baca dengan lebih lanjut di Terma Penggunaan.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Penafian
Maklumat dan penerbitan adalah tidak dimaksudkan untuk menjadi, dan tidak membentuk, nasihat untuk kewangan, pelaburan, perdagangan dan jenis-jenis lain atau cadangan yang dibekalkan atau disahkan oleh TradingView. Baca dengan lebih lanjut di Terma Penggunaan.