Copper price remains under the control of the bulls despite the recent decline. The fundamentals are still solid and are expected to continue supporting the red metal. Even so, it may remain under pressure in the short term as investors fully price in a hawkish Fed.
Fundamentals remain intact
Tight copper supplies have been one of the asset’s bullish drivers; an aspect expected to continue till 2030. In addition to supply interruptions in major producing countries within South America, prospects of heightened demand are set to boost copper price in coming months and years.
With regards to copper supplies, unrest in Peru continue to support copper price. Notably, the south American country accounts for about 10% of the global supplies. Besides, the other major producer – Chile – reported a 7% YoY decline in late last year. Chile is the leading producer of copper; accounting for over a quarter of the world’s supplies.
At the same time, prospects over China’s reopening and the transitioning to green energy are expected to continue boosting the financial asset in the short and long term. However, even with these solid fundamentals, uncertainties over the next move by the Federal Reserve may curb copper price gains in the short term. The financial markets are yet to fully price in a hawkish Fed; which explains the easing of copper price’s rallying in recent sessions.
Copper price outlook
COMEX copper futures is in the green for the second session in a row after dropping to a one-month low at the beginning of the week. As seen on its daily chart, the red metal continues to trade above the 50-day EMA while hovering around the short term 25-day EMA.
While I expect the bulls to remain in control, the asset will likely be subject to curbed gains in the ensuing sessions. In particular, copper price may hover around 4.1065 in the near term.
Even with the probable rebound past this zone, I expect 4.3070 to remain a steady resistance level. If that happens, the formation of the bearish double top patten may yield a decline back to the aforementioned support level of 4.1065.
On the lower side, lack of enough bullish momentum to boost copper price past the zone around 4.1065 may give the bears an opportunity to retest the week’s low. In that setup, 3.9645 and 3.8745 will be support levels worth watching.