Copper price edged lower on Wednesday amid a strong US dollar and bearish demand outlook.As at the time of writing, COMEX futures were at $3.44 per pound.
Fundamentals
According to Rio Tinto’s CEO Jakob Stausholm, the red metal’s short-term outlook “might look a little bit challenged”. During an interview with Bloomberg, the leader of the second-largest mining company in the world noted that decades-long inflation is one of the underlying factors.
Besides, there have been persistent concerns over slow global economic growth. In China, the leading consumer of the industrial metal, COVID-19 related losses have continued to impact the economy. Couple that with the energy crisis in Europe and high inflation in the US and copper price will likely remain on a downtrend much longer. Granted, Stausholm was bullish on the commodity’s long-term demand outlook based on the expected energy transition.
A strong US dollar has also been weighing on copper price in recent months. As a kneejerk reaction to the Fed interest rate decision, the dollar index hit a fresh 20-year high at $111.24. The Fed approved a thrid super-sied rate increase of 75 basis points in its September meeting. Besides, it pointed to remaining aggressive in its policy tightening as it strives to deal with the 40-year high inflation. Notably, a strong US dollar makes copper more expensive for buyers holding other currencies.
Copper price prediction
In the latest article, I forecast that copper price will remain within the triangle pattern highlighted in red in its daily chart. Indeed, the COMEX futures have been hovering around 3.52 for about a week now.
On a daily chart, copper price is trading below the 25 and 50-day exponential moving averages. A look at both the fundamental and technical indicators signals that the red metal may remain on a downtrend in the short term.
The aforementioned triangle formation will be worth watching in the ensuing sessions. As a reaction to the Fed interest rate decision, the bears momentarily pushed the asset past the range.
I expect September’s low of 3.37 to remain a steady support level for copper price into the next week. Even so, the bulls will likely lack enough momentum to yield a bounceback to and past 3.69.
