Copper price extended its previous gains on Friday while struggling to break the resistance that has shaped its range-bound trading since the start of August. The US government’s efforts to classify the red metal as a critical mineral has boosted the market sentiment in recent days. A relatively weak US dollar and optimism over Chinese demand are also offering support to the asset.
However, concerns over the supply and demand dynamics are capping its gains. At the time of writing, COMEX copper price was hovering along the crucial resistance level of $4.46 while its strong support levels sustained its rebound.
Copper price gains curbed by concerns over demand/supply dynamics
A strong support and equally strong resistance have shaped COMEX copper price movements in August, with the bulls striving to shift the trend into the coming month. On the one hand, the market sentiment has been bolstered by the US efforts to list the red metal as a critical metal. This move is expected to increase interest in the metal as it streamlines permits for its mining, processing, and exploration.
Notably, a weaker US dollar is also supporting copper prices by making the dollar-priced asset less expensive for buyers holding foreign currencies. The greenback is set to record its first weekly gain after three consecutive weeks in the red. Amid the heightened expectations of a Fed rate cut in September, the dollar is benefiting from signs of a resilient economy.
Even with these tailwinds, copper price gains are being capped by the surge in inventories and demand concerns. With the post-tariff normalization, LME-registered inventories are at 156,100 tonnes; surging by 72% since late June. At the same time, COMEX stockpiles have almost tripled since the start of the year.
What’s more, latest data showed Chinese industrial profits down by 1.5% year-over-year. Granted, this is an improvement from the 4.3% and 9.1% drop in June and May YoY. Despite these concerns, the red metal is expected to benefit from the heightened decarbonization and digitalization efforts globally.
Copper price technical analysis: Path to trend reversal
COMEX copper price held gains from the previous session, which had it trade at a two-week high. With the rebound, bulls are striving to break the current resistance level of $4.56.
A look at its daily chart indicates that it is still under selling pressure as it continues to trade below the 25 and 50-day EMAs. Indeed, the bearish death-cross pattern, which formed earlier in the month when the short-term 25-day EMA crossed the medium-term 50-day EMA to the downside, is still in place. At the same time, its RSI of 43 points to the likely continuation of range-bound trading.
In the short term, I expect the support level at $4.43 to remain steady while the bulls attract enough buyers to break the resistance at $4.56. If successful, COMEX copper price will likely rebound past the 25-day EMA to the upper resistance level of $4.66. A move above that zone is needed to shift the price trend.
The post Copper price strives to break crucial resistance as sentiment improves appeared first on Invezz
