Copper price remains under pressure with the previously steady support zone of $3.75 being a major resistance level. Slow global economic growth remains a key bearish driver. Even so, low inventories are offering support to the industrial metal.
What’s driving the market?
In recent months, copper price was in a bear market amid concerns over slowing global economic growth and the probable recession. In fact, in mid-July, COMEX futures dropped to its lowest level since November 2020 at $3.13 per pound. It is now set to record its fourth week of gains in a span of six weeks.
On the one hand, slowed economic activities in major economies has seen copper price remain below $3.75 for close to two months now. Prior to that, the aforementioned zone has been a steady support level since February 2021.
Data released earlier in the week showed that the Euro-zone economy contracted for the second month in a row in July. Soaring energy costs and high inflation have been weighing on the economy and rising recession concerns.At the same time, The People’s Bank of China decided to lower its interest rates with the intent of supporting the economy that has been under pressure from the ongoing property crisis and slow recovery from the coronavirus pandemic.
Even so, low inventories are offering support to copper price. For instance, there are growing concerns over the decline of production by European smelters amid the soaring energy costs. Based on the fundamentals, the metal’s downtrend may have been overdone. From this perspective, it is likely that it has found its short-term bottom at July’s low. Even so, it may remain subject to curbed gains in coming weeks.
Copper price prediction
As shown on its daily chart, copper price was trading above the 25 and 50-day exponential moving averages on Friday. Even with the recorded gains, it will likely remain under pressure in the short term.
In particular, I expect the COMEX copper futures to continue hovering around the 50-day EMA at $3.68 with $3.77 as the resistance level to look out for. On the lower side, it will likely hold steady above 3.52 despite the probable pullback from its current support zone of 3.62; which is along the 25-day EMA. However, a move above $3.77 will invalidate this cautiously bullish thesis.
