Copper price have continued to trade below the once steady support zone of $4.00 despite optimism over China’s reopening. Even with the bullish drivers, the red metal is not out of the woods yet. In the ensuing sessions, the US dollar and situation in China will be the major drivers in the market.
China’s economy is largely influential to the commodities market and industrial metals in particular. In fact, COVID-19 restrictions in the Asian country has been one of the red metal’s bearish drivers in recent months. In July, it dropped to its lowest level since November 2020 at $3.13.
However, more recently, optimism over the reopening of the Chinese economy has yielded a rebound in copper price. In mid-November, it edged closer to the once steady support level of $4.00 by hitting a five-month high at $3.96.
With the recent rebounding, the bulls are on another attempt to hit the aforementioned psychological level. On Friday, it hit an intraday high of $3.93. In addition to the easing of China’s COVID-19 restrictions, the decline in the US dollar has also boosted copper price.
Copper price not out of the woods yet
On the surface, copper price appears set for further rebounding. Even so, there are some factors that traders shouldn’t dismiss. To begin with, China’s reopening may mean further spreading of the coronavirus. If that happens, strict restrictions may be reinstated; an aspect that would affect copper demand in the leading consumer nation.
Besides, the Chinese real estate sector is still under pressure. In addition to being used in the electrical and industrial sectors, copper is also used in the construction industry. Even with the expected support by the Chinese government to property developers, it may take several months before full recovery is realized.
Furthermore, in the ensuing sessions, investors’ focus will be on the Fed meeting scheduled for 13th and 14th. Even with the recorded decline, the dollar index continues to find support at $104.00 as has been the case since late June. With the probable hawkish stance, copper price may continue to trade below $4.00 a while longer.