Copper price: key levels to watch amid concerns over demand outlook

Copper price has been on a decline since hitting a two-month high in the past week. Slowed factory activity in China has impacted demand.

Chinese manufacturing activity

The slowing down of China’s manufacturing activity is one of the key factors impacting copper prices. On Monday, the country’s Caixin manufacturing PMI for July came in at 50.3. While a figure above 50 still represents expansion of the nation’s manufacturing economy, it is lower than the prior month’s 51.3 and forecasted 51.0. Notably, it is the second month in a row that the figures have come in lower-than-expected. According to China’s General Administration of Customs, imports of refined copper have been declining since July 2020 when it hit a high of 762,211 tonnes.

At the same time, the US ISM manufacturing PMI is at 59.5. Analysts had expected a reading of 60.9 in comparison to the prior month’s 60.6. With China being the leading consumer of industrial metals such as copper, a decline in its factory activity has triggered concerns over the demand outlook.

Aggressive spreading of the Delta variant in China and other parts of the world has further dented copper’s demand. Besides, the government has been keen on taming the rising commodity prices. On Wednesday, the Dalian Commodity Exchange indicated that it is looking into 48 cases of abnormal trading behaviour.     

Copper price technical outlook

Copper price is consolidating along its prior resistance-turn-support level of 4.3300 after a week-long downtrend. After hitting a one-month low of 4.1665 on 19^th July, the red metal surged close to its two-month high at 4.6250 in the past week. Since then, it has dropped by about 6.50%.

At the time of writing, it was down by 0.16% at 4.3255. Since Monday, it has fallen by 4.46%. On a four-hour chart, it is trading below the 25 and 50-day exponential moving averages with an RSI of 32. In the near term, copper price is likely to continue finding support at the current level of 4.3200.

As it is currently at the periphery of the oversold territory, more buyers are likely to enter the market. If that happens, it will probably rebound past the crucial level of 4.3750 to find resistance along the 50-day EMA at 4.4180. Past that point, the bulls will be targeting the psychological level of 4.5000. On the flip side, a move below 4.3000 will probably place the support level at 4.2500 or lower at July’s low of 4.1665.