On Wednesday (April 8), global base metals market sentiment saw a dramatic reversal, with copper prices experiencing a strong breakout after a period of consolidation. Driven by significant marginal improvements in the Middle East situation, the benchmark three-month copper futures contract (CMCU3) on the London Metal Exchange (LME) rose as much as 3.5% intraday, reaching $12,755.50 per tonne, its highest level since March 18.



Market Background for the Day : The core market logic shifted from "conflict concerns" to "a return to risk appetite." A well-known institution pointed out that the US announced a short-term ceasefire agreement with Iran for two weeks, with the agreement predicated on Iran lifting its blockade of the Strait of Hormuz. This news directly alleviated concerns about a global economic slowdown previously triggered by disruptions to Middle Eastern energy supplies. Crude oil prices plummeted by over 16%, while industrial metals, represented by copper, rose sharply due to anticipated demand recovery. Nevertheless, the mainstream market view remains cautious, believing that the ceasefire agreement is conditional and fragile, and that the market will continue to be driven by news in the short term, rather than entering a sustained risk-seeking phase.

In-depth analysis of fundamentals and technical aspects

From a macroeconomic perspective, the strong rebound in copper prices is a correction of the previous oversold condition. Looking back at March, copper prices fell by a cumulative 7.6% due to regional instability. Currently, although geopolitical risk aversion has eased, the fundamental supply and demand structure remains complex.

Supply and demand game:
On the data front, LME copper inventories show a clear accumulation trend. As of April 7, total copper inventories in LME approved warehouses reached 385,275 tons, an increase of over 10,000 tons from April 2, reaching a new high since March 2018. In particular, inflows to warehouses in New Orleans and Asia have increased significantly, reflecting no shortage on the physical supply side. Furthermore, the discount of spot contracts to three-month gold futures widened from $84.60 on Tuesday to $89.50, further confirming that the current market is in a contango structure, and the acceptance of higher prices by spot demand remains to be seen.

Logical deduction:
The combination of "positive macroeconomic factors and ample microeconomic supply" has led to increased price volatility. This divergence manifests technically as strong short-term explosive potential, but with significant upward pressure.

Technical Analysis:
On the 4-hour (240-minute) chart, copper prices have shown a clear V-shaped reversal .

1. Moving averages and Bollinger Bands: The current price (around 12688) has effectively broken through the upper Bollinger Band (12654.06), with the bands widening upwards. The 5-day and 10-day moving averages are clearly in a bullish alignment, indicating strong short-term bullish momentum.
2. Momentum Indicators: In the MACD indicator, DIFF (79.78) and DEA (48.45) are both above the 0 axis, the red bars continue to expand, and there are no signs of top divergence yet, indicating that the bullish trend still has room to continue.
3. Technical characteristics: The price has successfully stabilized above the previous consolidation support level of 12670 and is attempting to challenge the March rebound high of 12755.

Support and resistance range prediction:

Reference contract: LME electrolytic copper three-month futures.

Core range logic: Prices above 12670 confirm a strong bullish zone, but are suppressed by high inventory levels, and a stronger macro catalyst is needed to break through the 13000 mark.

Key points to watch during the trading session: Whether the high of 12755 can be broken and held, and whether the stabilization of crude oil prices will lead to a rebound in inflation expectations.

First resistance level: 12755.50 (recent rebound high)

Second resistance level: 12900 - 13000 range (psychological psychological barrier and previous area of heavy selling pressure).

First support level: 12654 (Bollinger Band upper rail conversion level)

Second support level: 12413 (Bollinger Band middle line and the dividing line between bullish and bearish strength)

Future Trend Outlook

Looking ahead, copper futures will enter a phase of intertwined "news digestion" and "fundamental verification." In the short term, as long as prices remain above 12650, the bullish trend remains intact, and a pullback to fill the 13000-13500 gap is possible. However, considering LME inventories are at multi-year highs and the cash discount is widening, if the ceasefire agreement is repeatedly violated, prices could easily form a false breakout around 12800 and retest the 12400 support level. Investors are advised to closely monitor the details of the agreement's implementation in relevant regions and whether there is a turning point in LME inventory flows, as this is the core logic supporting a long-term bullish trend in copper prices.

Frequently Asked Questions

Question 1: Why did copper prices perform stronger after the ceasefire agreement was reached?
Copper possesses strong industrial attributes and functions as a macroeconomic barometer. Previous tensions, fueled by tariff rhetoric and expectations of supply chain disruptions, led to pessimistic market expectations for global economic growth. The core impact of the ceasefire agreement was a significant reduction in energy costs (due to the sharp drop in crude oil prices) and the lifting of shipping blockades, directly boosting cost expectations and demand outlooks for global manufacturing. Therefore, compared to the cooling of safe-haven assets like gold, copper, as a pro-cyclical commodity, often experiences more explosive rebounds.

Question 2: Current LME copper inventories are at their highest level since 2018, so why hasn't this prevented prices from rising?
Inventory is a lagging indicator, while prices reflect expectations. The current increase in inventory is mainly due to changes in previous trade flows, such as large inflows of metal into warehouses in New Orleans and Asia. The market is currently more focused on expectations of a "restart in demand" after the ceasefire. Only when prices rise to a certain level, and downstream demand still cannot absorb the high inventory, leading to a continued widening of the discount, will high inventory become a downward pressure on prices to reverse.

Question 3: The MACD indicator shows an uptrend, but the discount is widening. Is this a contradiction?
They are not contradictory. MACD reflects the direction of market momentum, indicating a strong short-term inflow of funds. Contango, on the other hand, reflects the availability of physical goods in the spot market. This divergence usually means that the market is driven by financial attributes rather than physical demand. In trading logic, this situation is called "price increase under weakening basis," which often indicates an increased frequency of market corrections during an upward trend.

Question 4: What differentiated impacts will this ceasefire agreement have on other base metals such as aluminum?
Aluminum was more directly affected. Previously, some smelters in the Middle East were attacked and damaged, and the region accounts for about 10% of global aluminum production, making it highly dependent on the Strait of Hormuz. After the ceasefire agreement was reached, aluminum prices remained relatively stable (flat), mainly because the disruption to the supply side had already occurred, and production recovery would take time. The logic behind this is more inclined towards a "revaluation of premiums after supply-side damage," while copper was more driven by "a recovery in macroeconomic demand sentiment."

Question 5: What is the key significance of the 12755 site from a technical perspective?
12755 represents the interim peak of the rebound on March 18th. In technical analysis, if the price breaks through this level with significant volume, it signifies the formal establishment of a V-shaped reversal, opening a path to 13000 or even 13500 (the February high). Conversely, if the price repeatedly rallies and then falls back at this level, combined with the current high inventory levels, it may evolve into a high-level consolidation range.