Copper price forecast with no huge Chinese stimulus in sight

copper price

Copper price has edged higher in Friday session, even as it remains below the previously steady support zone of $3.75. While the easing of the US dollar has boosted the industrial metal, recession woes remain a major bearish driver.  


US dollar

As is the case with other dollar-priced commodities, copper price tends to move inversely to the value of the US dollar. After hitting a fresh 20-year high at $109.33 about two weeks ago, the dollar index has eased to $105.95 as at the time of writing.

The easing in the greenback’s uptrend is a reaction to Jerome Powell’s comments that shows the Fed’s recognition that its aggressive policy tightening may result in slowed economic growth. Subsequently, investors expect the central bank to pause on the aggressive rate hikes in coming months after approving a super-sized increase of 75 basis points in two consecutive months.

Recession woes

Even with the bullish driver, the heightened recession concerns continue to curb its gains. Since the beginning of July, the industrial metal has remained below $3.75; a level that was a steady support zone for the commodity since February 2021.

Data released by the US Bureau of Economic Analysis on Thursday showed that the US economy contracted for the second quarter in a row; meeting the standard definition of a recession. US GDP dropped by 0.9% at an annualized rate after declining by 1.6% in Q1’22.  

Besides, reduced hopes on a major Chinese stimulus will likely continue to curb copper price gains in the short term. During the critical Politburo meeting held on Thursday, the the country’s top leadership did not signal a huge stimulus for economic growth as investors had expected. Granted, the country’s economic recovery gained momentum in July amid improved risk sentiment. In the ensuing sessions, economic data and overall market sentiment will have a major impact on copper and other industrial metals.

Copper price technical analysis

Copper price is set to record its fourth consecutive month of losses. Even so, it has been in the green over the past two weeks; rebounding from its lowest level since November 2020 at 3.13. As highlighted on its daily chart, the red metal is trading around the 25-day EMA while remaining below the 50-day EMA.

In Friday’s session, it is hovering around the critical level of 3.50, which is along the 25-day EMA. In the immediate term, it will likely continue to offer some resistance to the financial asset. If the bulls gather enough momentum to break the resistance, they will have an opportunity to retest July’s high of 3.58. On the flip side, a pullback may place the support at 3.40.

copper price
copper price

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