Copper rally faces up against another key momentum test

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It’s tough to not be bullish on copper against the backdrop of the green energy transition. The story has been there for a while now. But timing is everything when it comes to trading and in the case of copper, it is finally starting to come into the spotlight. In April, copper rallied by 13% and is following that up with another 11% rally so far in May. But is the surging rally starting to run out of steam?

After having touched above $5 per pound for the first time last week, copper futures settled just under that for a while. That before a run higher again earlier this week to a fresh record high. But as seen above, there are some technical challenges presenting itself for copper at the moment.

The latest retreat today is moving back towards a test of its 100-hour moving average (red line). And a break below that will see the near-term bullish bias turn more neutral instead. And a fall back below $5 will also be a setback to the recent buying momentum in general.

So, keep a close watch on that as commodities could be looking at a bit of a pullback after the stronger gains earlier this month.

From a structural perspective, copper still has the recipe to scale fresh heights – much like gold and silver. And despite being different from its precious metals counterparts, the fundamental outlook continues to be one that is staying supportive. So, it can definitely also benefit from a broader rally in the commodities and metals space.

As such, any major pullbacks from here will be a good spot for cheaper entries again.