Copper price edged lower on Thursday following the release of lower-than-expected Chinese inflation data. While optimism regarding the recovery of the second largest economy is set to supporting the red metal, concerns have arisen on whether the removal of COVID-19 restrictions is enough to yield the desired economic growth.
Chinese economy
Data released earlier on Thursday showed that China’s consumer prices rose at a rate of 1.0% in February on a year-on-year basis compared to the prior month’s 2.1%. On a monthly basis, it dropped by 0.5% after surging by 0.8% in January. In addition to missing analysts’ expectations, the figures further eased the optimism over the strong rebounding of the Chinese economy.
Indeed, this is one of the key factors that caused copper price to edge lower on early Thursday trade. As the leading consumer of industrial metals, the health of the Chinese economy has continued to impact the red metal’s price movements.
The eased inflation pressures in China have pointed to a limited boost in the form of domestic demand post the COVID-19 lockdowns. Indeed, the decline in consumer-price growth has cast doubts on the strength of the highly anticipated Chinese economic recovery. This comes after the National People’s Congress (NPC) guarded economic growth target and signals that the Beijing administration is shying away from approving a significant economic stimulus.
Granted, recent data showed that China’s factory activity was higher than expected in February. Overall, optimism over the country’s economic rebound will continue offering some support to copper price.
Copper price prediction
For as long as copper price remains below the crucial resistance zone of 4.2500, the bears will be in control. Indeed, I expect that to be the case in the short term. Granted, it is still trading above the long-term 200-day EMA even as it hovers around the 50-day EMA.
On the lower side, 3.9145, which is along the 200-day EMA will likely continue to offer steady support to the read metal. However, in the short term the range between 4.1345 and 4.0000 will be worth watching.
