Copper price has eased on its losses following the bullish Chinese industrial data. In the past week, COMEX futures declined further to trade at its lowest level since February 2021 at $3.64 per pound. While it has bounced off those lows in early Monday trade, it remains on the downtrend that has been in place for about three-and-a-half months now.
What’s driving the market?
On the one hand, the bullish data released by the National Bureau of Statistics of China earlier on Monday is largely behind the recorded rebound. The figures pointed to an improvement of the Chinese economy following the easing of COVID-19 restrictions.
The country’s industrial firms’ profits rose by 1.0% in May. Even so, the figure is lower than the prior month’s 3.5%. Slowed economic growth at the national and global level remain key headwinds. Compared to a similar period in 2021, the industrial profits have dropped by 6.50% compared to the previous reading of -8.50%.
Nonetheless, improved sentiment regarding the Chinese economy may not be enough for a trend reversal in copper price. The red metal is viewed as an economic bellwether. Amid the heightened recession concerns across major economies, traders and analysts alike forecast a decline in industrial activities. For as long as the other economies are headed to a recession, China will also not be in a position to record steady and significant growth.
Dwindling inventories boosted copper price to an all-time high of $5.02 in early March 2022. Granted, there is little sign of improvement on the supply side. Just like in the case of crude oil price, analysts have insisted that demand destruction is the only solution to the soaring prices. True to the outlook, heightened inflationary pressures and the subsequent decline in global economic growth has seen the red metal record its third straight month of losses.
In the new week, the range between the recent low of $3.64 and the resistance level of $3.84 will be worth watching. For a trend reversal to occur, the bulls will need to boost copper price past the psychologically critical zone of $4.00. With further rebound, I expect it to find resistance at as the bulls lack enough momentum to push it past the aforementioned support-turn-resistance zone of $4.00 in the short term.