After the surge after the Spring Festival, copper prices began a sharp correction in March, with London copper retracting by as much as 11%, and Shanghai copper retracting from above 70,000 to 65,000.
Short-term copper price correction, the negative effect of the rebound of the US dollar index, and the emotional impact of the nickel price crash on the non-ferrous market, but more importantly, in the background of only relying on expected speculation and soaring, the market needs to digest the high valuation in the form of a correction.
In the long run, the logic of bullish copper prices has not fundamentally reversed, the demand side gains to be realized, copper still has upside expectations, the price is hard to say the top, we wait for the full catharsis of bearish sentiment after the opportunity to do long.
Short - term adjustment to digest high valuation
In the background of copper and oil resonance rise, the market inflation expectation is heating up, the 10-year US bond yield quickly pushed up to more than 1.5%, the virtue, the US and Japan interest rate differential began to strengthen, the dollar index rebounded sharply, the rise of the currency value induced a sharp pullback of copper priced in dollars.
From the point of copper itself, market from ledo, before the Spring Festival began trading logic, such as the overseas economic recovery, delta front and on New Year's day consumption and consumption and so on, has not been cashed, consequently logic cannot fully proved, when the nickel slump dragged down the market risk preference, market will choose in the form of a callback to digest the expected high valuation of hype.
In the short term, the US Democratic government's $190 million fiscal stimulus passed the Senate and Senate, is expected to be implemented in the near future, the rebound of the dollar index is hard to say the end, before the actual consumption started, the market has not yet fully vent the bear sentiment, we think copper will still adjust the pattern.
From the adjustment form, we are more inclined to the form of time rather than space to carry out, in other words, in the copper bull logic is not false and the domestic seasonal consumption season is about to start the background, copper prices under the support, the scope of the correction is limited, Shanghai copper can refer to the 20-day moving average support.
The long - term bullish logic is not reversed
From the point of view of commodity attributes, copper fundamentals are still good.
Years demand side has two big bright spot: the first is the recovery of overseas demand, in 2020 the outbreak has given rise to the demand of the U.S. housing replacement, the real estate market into the high cycle interval, number of home sales and housing prices on the upswing, the inventory of existing homes continues to decline, library pin than fell to a nearly 10 years of history, low market of real estate investment and inventory in the United States in 2021 expected optimism, is expected to pull the copper consumption abroad.
Second, the demand increase in the field of green energy. The Democratic government of the United States has a strong preference for green energy and puts forward the concept of carbon neutrality in China. Copper is an intensive consumer in areas such as clean energy and new energy vehicles, and the increase of green property provides a long-term consumption increase for copper.
In addition, there is also a stage in the supply of copper end, outbreak of South America's recovery was slow, copper concentrate processing fell to a record low near ten years, ore supplies in the first half of the year may always hold tight state, do not rule out a high ore price in the second quarter run interference smelting capacity, and overseas stock in nearly 10 years of history, low periodic tight supply situation also good prices.
From the perspective of monetary attributes, although the US bond yield upward, but the Federal Reserve is still firm and loose attitude, monthly maintenance of fixed purchases, policy is expected to be difficult to turn in the first half of the year, the formation of liquidity support for copper prices.
Copper prices have not yet peaked, the main pullback buying
In the short term, against the backdrop of a rebound in the dollar, there is a bearish sentiment in the market, copper will continue to adjust to absorb high valuations, we tend to be more time for space to complete the adjustment, the lower 20-day moving average is supported.
Follow-up suggestions focus on the seasonal pick-up in domestic consumption and the U.S. demand, especially the real estate driven inventory replenishment, expected cash is expected to become an important driver of medium-term price upward repair, copper prices have not yet peaked, long-term callback buying is the main investment strategy.
