SHFE Copper Prices to Fluctuate For the Foreseeable Future

SHANGHAI, Oct. 26 (SMM) –SHFE copper prices experienced volatilities recently, with all SHFE copper contract prices falling by their daily limit last Thursday and touching their upper trading limit this Monday. SMM believes volatile price changes indicate extreme unstable market sentiment at present, and that SHFE copper prices will mainly fluctuate for the foreseeable future.

HSBC Holdings PLC announced HSBC China Manufacturing Purchasing Mangers Index (PMI) rose to 51.1 in October, and the highest in 5 months, while new orders and output rebounded significantly. Lifted by the news and combined with positive expectations about the EU summit, SHFE copper prices climbed and touched the upper trading limit in the afternoon session. However, both the positive PMI data and the EU's moves to save the markets are not strong enough to boost market confidence, since the European debt crisis can't be really solved by only a summit. Thus, there is possibility that long investors made operations before any result from the EU summit, and copper prices will fall into the previous fluctuating range as long as EU summit fails to produce satisfied results.

The US dollar has returned and found support at the 60-day moving average, and is unlikely to fall further, which will hamper the rising momentum of LME copper prices, which still face great resistance at USD 7,660/mt. Besides, officials of the National Development and Reform Commission (NDRC) recently said at the 9th China Reform Forum that China's CPI growth began to fall since August, and was expected to be controlled below 5.0% in the next two months.    

Recently, the most active SHFE 1201 copper contract prices have been struggling between the 5- and 10-day moving averages. Although SHFE 1201 copper contract prices opened higher at the 20-day moving average Tuesday, stabilizing at the price mark needs to be tested. In addition, SHFE 1201 copper contract prices are still far away from the 30- and 60-day moving averages. Therefore, SMM believes SHFE copper prices will mainly fluctuate for the foreseeable future.