Copper price is back above the critical level of $4.50 per pound after plunging below it earlier in the week. As at 10:20 a.m UTC, the COMEX futures were at $4.53; up by 1.82%. The red metal has been on a rebound for two sessions after dropping to $4.38.
Underlying drivers
Even with the heightened volatility that has defined the market in the recent past, it has remained above the support zone at $4.25 for about five weeks. As more countries focus on implementing their decarbonization policies, heightened demand will likely boost the metal above the aforementioned level. In fact, Goldman Sachs is of the opinion that copper will be one of the key beneficiaries of the predicted commodities super cycle expected to last for about 10 years.
Are you looking for fast-news, hot-tips and market analysis?
Sign-up for the Invezz newsletter, today.
Even with the current bullish outlook, the value of the US dollar and slowed growth of the Chinese industrial economy will likely be its key headwinds.
A few days ago, Luo Junjie – the spokesperson of China’s Ministry of Industry and Information Technology – indicated that the country’s industrial economy has continued to experience downward pressure from low consumer demand and slow trade growth. Besides, it is yet to fully recover from the global pandemic. This is despite the Middle Kingdom recording a GDP growth of 4% in Q4’21 on a year-over-year basis.
Copper price will also be reacting to the US dollar. Similar to other commodities, it tends to have an inverse correlation with the greenback. After momentarily dropping below the support zone at $96.00 earlier on Wednesday, the dollar index has bounced back to the current $96.11. Investors are now keen on the Fed interest rate decision later in the day.
Copper price prediction
Copper price is trading above the 25 and 50-day exponential moving averages as seen on a four-hour chart. Based on the technical indicators, it will likely record further gains in the ensuing sessions. At its current level, it has invalidated the bearish outlook substantiated by the double top pattern whose formation began earlier in the month. The pattern is usually a bearish signal.
In the near term, I expect copper price to pull back to 4.49. It may drop further to 4.46 before bouncing back. On the flip side, further rallying will give the bulls an opportunity to retest the month’s high at 4.60.
eToro
10/10
67% of retail CFD accounts lose money
