Copper price analysis: Chinese demand offsets stalled US-Iran peace talks

Copper price entered the new week in consolidation mode after recording a weekly loss in the past week. A stalemate in the US-Iran peace talks have rendered the red metal range-bound for two weeks now. On the one hand, the geopolitical tensions continue to curb its price gains. However, a decline in the US dollar and a surge in Chinese demand are offering steady support. 

Copper price consolidates as the US dollar eases

Dr Copper, often considered a barometer for the global economic health, remains range-bound as the geopolitical tensions in the Middle East continue to impact financial markets. On the one hand, a surge in Chinese demand is offering support to the red metal. 

Demand in the second largest economy is an influential driver as the nation is the leading importer of copper and other industrial metals. It accounts for about 60% of the metal’s global imports. Tight concentrate supply and low domestic arrivals have placed the social inventories of copper cathode in the country on a decline for the seventh consecutive week. 

Additionally, a decline in the US dollar has sustained Comex copper price above the months-long bullish trendline. Earlier on Monday, the dollar index rose to its highest level in three weeks at $99.35. However, it has since reversed those gains to trade at a level last recorded in the past week at $98.46 at the time of writing. 

With crude oil prices back in the triple digit zone, investors are concerned over the possibility of a stagflation. Indeed, these woes continue to curb copper price gains. However, the greenback’s safe-haven demand has not increased.  A decline in the US dollar renders copper less expensive for buyers holding foreign currencies.  

Comex copper price technical analysis

Copper price made subtle gains on Monday even as it remained range-bound. In the past week, the red metal recorded a weekly loss after four consecutive weeks of gains. Over the past two weeks, it has been in a consolidation phase as investors eye the stalemate in peace talks between the US and the Islamic Republic of Iran. 

A look at its daily chart signals that copper price may remain range-bound in the ensuing sessions. On the one hand, it is holding steady above the 25 and 50-day EMAs. Indeed, the bullish golden cross pattern formed about two weeks ago is still in place. 

Even with this support, the bulls lack enough momentum to break the resistance at $6.15. Based on both the technicals and fundamentals, the range between the resistance level of $6.15 and the support at $5.97 is worth watching in the immediate term. 

This range-bound trading places copper price above the bullish trendline that has shaped its movements for months. At the peak of the US-Iran war in mid-March, prices dropped past the trendline before rebounding in mid-April. As investors maintain a “wait and see” mood with regard to the US-Iran peace talks, copper price will likely remain above technical indicator. 

However, heightened tensions may have the red metal back below the trendline to find support along the 25-day EMA at $5.90. On the flip side, a breakout past the highlighted trading range will have the bulls eyeing a three-month high at $6.23.