As we wrap up a rather busy week in the financial markets and look forward to what's next I want to bring our attention to copper - which is a great gauge for global growth as is industrious metal key to the production process.
If expectations for global growth are positive and manufacturing sectors around the globe are expected to increase activity copper prices rise and when the global economy looks like it may be headed for recession copper falls. Because of its tendency to be able to predict recessionary forces it has garnered the moniker - Dr. Copper.
Looking at the current conditions in the daily chart of copper (using comex CFD prices) we are at an important crossroads.
The bearish case for copper argues that China as well as the euro zone is slowing, and that higher all prices are likely to dent the global recovery.
Technically we can say that copper has run its it key resistance at four dollars a pound and while not perfect could be in the process of forming a double top pattern with the neckline at $3.70. however following a steep decline to begin the week copper managed to bounce up off those lows finish in the middle of the current trading range.
The bullish case suggest that because the US economies momentum continues apace at it'll be able to counter any weakness from Europe or China and that China does not look like it's headed for a hard landing despite some recent soft measures. Also with the reduction of acute phase of the sovereign debt crisis in Europe the conditions are therefore slow but steady improvement in the European continent.
Technically speaking, we are interested in the 200 and 50 daily simple moving averages as they approach each other. When the 50 SMA crosses above the 200 SMA it's known as a golden cross and would be a very bullish signal. In order to confirm a bullish stance would like to see copper clear its recent highs.
The February US non-farm payroll data may help to bolster commodity prices will become back from the weekend and any move by the Chinese central bank to lower its reserve ratio requirement could also have a risk on impact.
Therefore as we did incoming data that we want to assess the implications of the global recovery we should be keeping a close eye on what happens next in copper prices and where prices had to next.
We will be covering this theme in our daily Market Intelligence Briefing on Monday. Don't miss the opportunity to get in on the deep introductory rate offer. Click here to find out more.
Nick Nasad is a macro economist, market analyst, and educator; and one of the main contributors to FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.