Copper price entered the new week on a high as the market digests supply tightness and China’s demand. However, a stronger US dollar curbed the gains of the dollar-priced asset. In the ensuing sessions, the market’s short-term drivers may fuel volatility, even as the long-term outlook remains steadily bullish.
Chinese copper demand adds to the speculative momentum
Copper price hit a fresh record high about two weeks ago as supply tightness fueled the uptrend. Even with the corrective pullback observed in recent sessions, concerns over US tariffs continue to boost the speculative momentum.
The tariff-driven hoarding by US buyers, coupled with shrinking inventories at LME and Shanghai warehouses, has copper price holding near its record high. At the same time, China aggressive restocking is bolstering demand. With this, the supply/demand imbalance is set to be the market’s principal catalyst in the short term.
Nonetheless, heightened volatility is expected near the highs. In the absence of a precise breakout or breach of crucial support, copper price may trade sideways in the short term. Besides, a stronger US dollar is set to curb the red metal’s upside. Similar to other dollar-priced assets, a stronger greenback renders the red metal more expensive for buyers holding foreign currencies.
At the time of writing, the dollar index was trading at $100.39, holding close to the 7-week high hit on Friday at $100.57. Investors are digesting the Fed’s hawkish tilt while eyeing the geopolitical conflicts in the Middle East. As a bellwether for the health of the global economy, persistent uncertainties are a key bearish driver.
Comex copper price technical analysis
Comex copper futures edged higher at the start of the week; continuing the gains recorded last week. On Monday, the red metal hit its fifth consecutive session of gains to trade at its highest level in close to two weeks. At the time of writing, it was trading at $6.78 a pound; up by 1.27%.
A look at its daily chart points to further gains in the short term. To begin with, copper price continues to trade above the short-term 25-day EMA and the medium-term 50-day EMA. Indeed, the bullish golden-cross pattern formed by the two technical indicators in mid-April is still in place. Besides, the asset is back above the crucial months-long trendline that has been shaping its price movements. At an RSI of 58, it has room for further gains in the ensuing sessions.
In the short term, $6.60 will likely offer steady support to copper price as the bulls strive to retest the all-time high hit earlier in the month. At its current level, it may enter a consolidation phase before rallying further. This would place it within a range of between $6.60 and $6.83.
The entry of more buyers will offer an opportunity to retest and top the record high of $6.90. On the flip side, a pullback past the bullish trendline would invalidate this bullish thesis while activating the support along the 50-day EMA at $6.54.
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