Copper finds itself in consolidation as the closure of the Straight of Hormuz will influence the supply offered.
Copper
Copper finds itself in the midst of a consolidation above the $5.50 level as we are sitting just below the crucial 50-day EMA and just above the previously mentioned $5.50 level. $5.50 seems to be a bit of a fulcrum for price and it does make a certain amount of sense as it will obviously be influenced by large options positions being placed.
There are a lot of questions as to where we go next, but it is worth noting that the Strait of Hormuz closure does take some copper out of the picture for the markets as approximately 40,000 tons per month are blocked, causing the price to perhaps spike a bit. I also recognize that we have a situation where we will be looking at this as a market that is trying to find its way to the upside as the longer-term demand and outlook for copper is strong.
Supply and Demand Dynamics
It is also worth noting that there recently has been a build in supply. The 200-day EMA is at $5.34, and I believe that it continues to be a major factor as well. So, there is your floor. To the upside, the $6 level I think would attract a certain amount of attention as it is a large round psychologically significant figure and I believe that breaking above there would probably take quite a bit of momentum.
That would open up the possibility of a move to the $6.50 level. That would be a longer-term call. Offsetting the supply crunch right now though is a temporary slowdown in China, which has a lot to do with copper demand.
All things being equal though, when you look at the chart from a longer-term perspective, this has been a nice little pullback. We'll see whether or not it is anything that has any real longevity to it. I believe given enough time we do reach the $6.50 level, but you need to be very cautious with your position sizing as copper by its very nature is typically choppy.
I remain bullish. I think in the longer term we will probably go much higher. Artificial intelligence, data centers, demand out of China, etc. should pick up. But with interest rates jumping and the Strait of Hormuz taking 40,000 tons out of the market per month, we do have issues with supply and demand at the same time, and it causes this type of choppiness.