Copper price prediction: focus on dollar, China’s industrial output data
- The declining value of the US dollar has boosted copper price.
- Investors are keen on industrial output data from China and other industrial economies.
- In the previous two releases, China's manufacturing PMI has been lower-than-expected.
Copper price ended the week in the green as the value of the US dollar declines. In the new week, focus will be on manufacturing PMIs and the greenback’s price movements.
Declining US dollar
Copper price is also reacting to the declining value of the greenback. On Friday, extended the weekly losses as a reaction to Jerome Powell’s speech during the highly anticipated Jackson Hole symposium.
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The Fed Chair indicated that the bank will likely begin tapering its asset purchases before the end of the current year. Notably, investors had anticipated a nearer timeframe. At the same time, Powell indicated that the timing of the taper should not be seen as a signal for rate hikes. The cautious stance pushed the dollar index to a one-and-a-half week low of 92.68.
Like most other commodities, copper price has an inverse correlation with the value of the US dollar. This explains why the red metal ended the week in the green. In the new week, the commodity will likely extend its gains as the market digest’s the Fed’s stance.
In the recent past, concerns over China’s slowed economic growth have weighed on industrial metals like copper. Data released two weeks ago showed that the country’s retail sales and industrial output was lower-than-expected in July.
However, the Middle Kingdom’s progress in containing the Delta variant has injected hopes on demand recovery. In the coming week, manufacturing PMIs will likely impact copper price. In particular, investors will be keen on China’s manufacturing data on Tuesday and Wednesday. Japan, Eurozone, the UK, and the US are also scheduled to release data on their industrial output in the new week.
Copper price technical outlook
A week ago, copper price dropped to a four-and-a-half week low of 3.96 in the COMEX market. At that point, it was in the oversold territory with an RSI of 15. The technicals hinted at a corrective rebound, which has since happened.
Since then, it has surged by about 8.99%. Since the beginning of the week, it has been hovering around 4.25, which has been a crucial support zone since mid-June. Copper price ended Friday’s session at 4.31, up by 1.67%.
On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages with an RSI of 66. In the new week, I expect the red metal to continue finding support at the crucial zone of 4.25. On the upside, it may reach 4.36 before pulling back.
However, enough bullish momentum may push the price to the resistance level of 4.37 before easing. A move below 4.22 will place it below the crucial support zone of 4.25 thus invalidating this thesis.