|
Copper is another litmus indicator. This now precious base non-ferrous metal is a useful gauge of world industrial indicators as it is a widely used metal that finds its way into many consumer products. At the end of the day it is what we consumers demand that influences economic activity and thus copper.
But for the Australian economy it is of vital interest, as it is a valuable ore for our mining industry and an important export commodity; in particular to Asia and especially China. So demand for copper from China is of deep interest to our miners and economic forecasters.
Copper has had had an incredible rally over the last several months:
click to enlarge
And you can see that copper has reached a wave five high. We could see yet another wave five – there can be three – but the conditions for at least one wave five have been met for the moment. Given this we could conclude there is not huge upside in the near term.
If we look at a weekly chart for action further out we see:
click to enlarge
We can make a number of observations. Copper is one of the few ‘securities’ to soar well past the old highs of 2008. But the flipside is that we are likely to see a retreat. It may take a few weeks to unfold – but unfold it will and we can expect to see a retracement to 50% or even 62% of the run up since June.
If this comes to pass so are we likely to see some retracement of the Aussie dollar. Possibly – but we will look at the outlook for the dollar next week.
Enjoy the ride
Tom Scollon
Chief Analyst |