Copper price analysis ahead of the US inflation data, Fed Chair’s speech

Copper price remains volatile in the new week after recording its first weekly loss in five weeks. A surge in US imports, and the eased bets on a September interest rate hike are offering support to the red metal. However, a rise in inventories and the persistent economic uncertainties have curbed its gains. In the new week, the US dollar, inflation data, Fed Chair’s speech, and the overall market sentiment will be key market drivers. 

Copper price remains range-bound amid differing indicators

Copper price has been under high volatility in recent sessions as investors continue to weigh the key market drivers. On the one hand, supply concerns and strong exports continue to support the long-term bullish outlook. 

Mining disruptions in top producers like Chile, coupled with the positive demand expectations, have offered steady support to the red metal. Besides, the surge of US copper imports has added to the bullish outlook.

In July, US importers shipped in over 200,000 tonnes of the red metal; the highest monthly import in 12 years. In addition to the volumes already in Comex warehouses and other storage facilities, the country’s stockpile now exceeds 1 million tonnes. The inventories have been built largely on the bet that Trump’s administration may impose levies on refined copper imports. 

While investors remain cautious over the possible taxes, the White House is yet to make any announcement on the matter. In fact, the deadline enacted for the US Commerce Department’s recommendation passed in June. 

Additionally, the increased copper stockpiles in the UK and China warehouses have further eased some pressure off copper prices. This is in addition to the sharp narrowing of LME backwardation.

Last week, on-warrant copper inventories rose by 63,000 tonnes across Europe, the US, and Asia; equating to an over 50% surge. In LME warehouses, the stocks rose by 28,000 tonnes as some previously canceled stocks were re-warranted. Stockpiles in warehouses linked to the Shanghai Futures Exchange also rose by close to 30% in the past week.

The influx is an indication on how quickly a copper price increase can pull inventories back to the exchanges. While the short-term tightness has eased, investors will be keen on the LME and Shanghai Futures exchange stockpiles for cues on price movements. 

Additionally, the market will likely react to the Fed’s Chair speech and performance of the US dollar amid the persistent economic uncertainties. As a conventional economic bellwether, Dr Copper moves in tandem with the global economic health. Notably, the persistent geopolitical tensions in the Middle East and the deep crisis in China’s property market continue to impact copper price movements. 

On Monday, the US dollar bounced off the three-month low hit late last week ahead of July’s PCE price index. Eased bets on a September interest rate hike are weighing on the greenback while offering support to copper and other dollar-priced assets. 

Comex copper price technical analysis

Comex copper futures edged lower on early Monday; continuing the volatility observed in the past week. At the start of last week, copper price rose to its highest level in over a week at $6.75 a pound. Despite the weekly loss, the red metal has held above the short-term 25-day EMA and medium-term 50-day EMA as highlighted in its daily chart. Notably, the months-long bullish trendline continues to shape its price movements.

In the ensuing sessions, the mixed indicators will likely sustain the consolidation phase. Indeed, at an RSI of 55, range-bound trading is likely in the near term. 

Amid the heightened volatility, copper price may continue to find support near the 25-day EMA at $6.50. This positions the bullish trendline as a crucial technical indicator in shaping the red metal’s short-term price movements. A decline past that zone will likely have the asset bounce off the steady support along the 50-day EMA at $6.43. 

On the upside,  $6.65 is a resistance level worth watching. Further gains will likely be curbed at $6.71.