Copper price prediction ahead of Chinese industrial data

Copper price has remained within a horizontal channel since late October. In the ensuing sessions, it will be reacting to the US dollar and Chinese industrial production data.

Strengthening dollar

Copper price is under pressure as the greenback continues to strengthen. Similar to other commodities, the red metal has an inverse correlation with the US dollar. This is founded on the fact that a strong dollar environment makes it more expensive for buyers holding other currencies.

At the time of writing, the dollar index, which measures the value of the greenback against a basket of six currencies, was at $96.15. Granted, it has been trading within a tight range since late November as investors focus on the Fed’s interest rate decision that is slated for Wednesday. However, it has held steady above the crucial resistance-turn-support zone of $95.50 for close to a month now.

With regards to Wednesday’s Fed meeting, investors expect a hawkish tone. This includes an acceleration of the bank’s asset-tapering program. Besides, they will be looking for cues on the timing of interest rate hikes in the coming year. A hawkish tone will likely exert additional pressure on copper price.

Chinese industrial production

In the ensuing sessions, copper price will also be reacting to the Chinese industrial production that is scheduled for release on Wednesday. The data will avail cues on the Middle Kingdom’s demand prospects into the coming year.

The data comes at a time when copper inventories have continued to rise. The surge, which began in the past week in LME-registered warehouses, now places the stockpiles at 84,450 tonnes. Besides, the stocks available to the market are at 78,300 tonnes compared to 15,225 tonnes in mid-October.  

Copper price prediction

The horizontal channel between 4.25 and 4.50 remains a crucial one for the red metal. Notably, it has been trading within this range since late October after dropping from its 5-month high of 4.82.

At the time of writing, COMEX copper futures were up by 0.06% at 4.28. On a four-hour chart, it is trading below the 25 and 50-day exponential moving averages.

In the ensuing sessions, the aforementioned range will remain a crucial one for copper price. In the immediate term, it will likely record subtle movements as investors await Wednesday’s Chinese industrial production figures. From that perspective, it may trade within a tight range of between the support zone of 4.25 and the 50-day EMA at 4.31.

Bullish Chinese data may push it to 4.37 before pulling back as a reaction to Fed’s hawkish tone. On the flip side, a move below the range’s lower border will likely place the support zone at November’s low of 4.19.