Copper price parred some of the week’s losses after the better-than-expected Chinese industrial data. Even so, a strong US dollar and bearish Chinese demand outlook continues to weigh on the industrial metal.
Fundamentals
China’s August manufacturing PMI was at 49.4 compared to the prior month’s 49.0 and economists’ forecast of 49.2. Granted, it represents a contraction for the second month in a row; an aspect that explains the commodity’s curbed gains. Slowed global economic growth, the coronavirus Omicron variant and the Chinese property crisis are the key factors behind the bearish copper demand outlook in the largest consumer of industrial metals.
In the ensuing sessions, the strength of the US dollar will also be a crucial factor in copper price movements. In particular, the US jobs data is scheduled for release on Friday. The figures will be of importance in predicting the Fed’s move in its September meeting. An environment of high interest rates has supported the greenback in recent months while weighing on copper price and the broader class of commodities.
Copper price prediction
After starting the week on its back foot, copper price has parred some of those losses on Wednesday. Even so, it remains below the critical support-turn-resistance level of $3.75. As at the time of writing, it was at $3.57 per pound in the New York market; up by 0.75%.
As shown on its daily chart, COMEX copper futures are trading below the 25 and 50-day exponential moving averages. Based on the technical and fundamental indicators, I expect it to remain under pressure in the short term despite the recorded rebound.
In the immediate term, the 25-day EMA at $3.61 will be a resistance level worth watching. Even with a further rebound, it will likely remain below the crucial zone of $3.75 with its gains curbed along the 50-day EMA at $3.67.
On the lower side, the psychological level of $3.50 will likely continue to offer support to copper price for the remainder of the week. However, further strengthening of the US dollar may yield a pullback to $3.47.
