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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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MNI China Daily Summary: Wednesday, Aug 21
Is Copper Set For A Correction In 2022?
- In the past 6 months, copper prices have stabilized around 430 despite the rise in Covid uncertainty this winter and the significant deceleration in Chinese economic activity.
- China Li Keqiang Index, which could be considered as a proxy of the Chinese real economic activity, has been falling in the past year and is still pricing in significantly lower copper prices.
- The top chart shows that the Li Keqiang Index has strongly led copper prices by 6 months in the past 15 years (Index inception).
- In addition, the plunge in the Baltic Dry Index, which is down over 75% since its October high, is also pricing in lower prices in the industrial metal.
- Even though most of the fall was attributed to the winter shipping bottlenecks and the significant deceleration in Chinese economic activity, it has also historically acted as a strong leading indicator (6 months) of copper prices in the past cycle (bottom chart).
- Analysts expect the global refined copper market to move into surplus in 2022, which could also increase the downward pressure on the commodity.
- Will the easing policy from China be enough to maintain copper prices elevated in the medium term?
- Copper broke below its 200DMA at 438.80 last week; next ST support to watch on the downside stands at 422.85, which corresponds to the 23% Fibo retracement of the 205.90 – 489.80 range.
- Key support remains at 400; the industrial metal found support several times at that level last year.
Source: Bloomberg/MNI
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Why MNI
MNI is the leading provider
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