From a price action perspective, copper has performed well in the past three years. In particular, after a sharp rally since its early 2020 (pandemic-related) lows, the price has been making ‘higher highs’ & ‘higher lows’ (in a ‘rising wedge’ pattern, see FIG 1). As of Friday’s intra-day highs, copper is trading about 5% below those highs.
From a macro perspective, there’s a strong case for a breakout above that level (once it’s reached). In particular, global central banks are aggressively cutting rates (especially outside of the USA). That should spark a cyclical recovery in the US and global economy, probably starting in 1H next year. Most importantly, the Chinese authorities have been especially active in easing policy, given their need to (i) fight deflation (e.g. see recent CPI/PPI readings); (ii) respond to the US ‘tariff shock’; and (iii) attempt to stabilise housing/consumption activity (following the bursting of the real estate bubble in 2021). Easing has therefore been dramatic. That is, Chinese policymakers have cut RRR/interest rates; increased capital provision to commercial banks; and expanded the PBoC balance sheet. Despite an ongoing balance sheet recession, therefore, a mini cycle ‘upswing’ is likely (see recent Longview research for detail, e.g. Monthly Global Asset Allocation No. 64, 20th May 2025 “China: Mini-Cycles in a Balance Sheet Recession”). That is, therefore, a key theme to watch in the copper market over coming months.
FIG 1: Copper futures (COMEX 1st quarterly position, US$/lb) with key moving averages
In the near term, though, and as copper approaches the top of its rising wedge pattern, there are growing signs of froth. Net long positioning, for example, has been building (although is not extreme); measured sentiment readings are back at multi year bullish levels (a contrarian SELL signal); while some technical (price based) models have crossed back above their SELL thresholds. Those signals are summarised by our ‘copper market timing model’ below, which is once again close to its key SELL level (see FIG 2). In the near term, therefore, the risk of some giveback is growing. If our macro view is correct, it will provide a key opportunity to build (add to) long positions.
FIG 2: Copper market timing model vs. copper price (US$/lb)
