Copper price forecast: corrective rebound or short-term bottom?

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on May 11, 2022
  • Copper price is under pressure amid a strong US dollar and global growth concerns.
  • The US CPI data is set to impact the greenback and the red metal by extension.
  • Goldman Sachs expect copper price to return to its uptrend in coming months.

Copper price is on a corrective rebound after hitting a fresh year-to-date low at the beginning of the week. The easing of the US dollar’s rallying is largely behind the bounce back. Nonetheless, it remains on a downtrend amid a strong greenback and concerns over the global economic growth.

copper price
copper price

Fundamentals

While copper price has bounced back from the YTD low hit earlier in the week, the US CPI data scheduled for release later in the day will likely reverse the recorded gains. Price pressures are one of the aspect that has shifted the Federal Reserve to a hawkish stance.

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However, some analysts are of the opinion that the consumer prices have peaked after hitting a four-decade high of 8.5% in the past release. As such, April’s CPI data is set to impact the US dollar and copper price by extension. As is the case with other commodities, prices of the red metal tends to move inversely to the value of the greenback.     

Even with the three-week decline in copper price, analysts remain optimistic that it will get back to its uptrend in coming months. In 2021, the investment bank indicated that copper is the new crude oil amid the forecasted commodities super cycle.

Indeed, it has been on a prolonged rally, surpassing the psychological level of $5.0000 per pound about two months ago for the first time on record. About a month ago, Goldman Sachs stated that “higher copper prices are an inevitability.”

Copper price forecast

Copper price has eased on its three-week downtrend. At the beginning of the week, it extended its losses to hit a fresh year-to-date low of 4.1260. The last time that the red metal reached that level was in mid-December 2021. In Wednesday’s session, it has rebounded to trade at 4.2065 as at 07:12 a.m GMT.

Even with the bounce back, it is still on a downtrend as observed on the daily chart. Besides, it is trading below the 25 and 50-day exponential moving averages.

Based on both the fundamentals and technical indicators, the gains recorded in Wednesday’s session is likely a corrective rebound rather than a trend reversal. Granted, I expect it to have found its short-term bottom at the week’s low. In coming months, it will likely continue on its uptrend.

After getting into the oversold territory on Tuesday with an RSI of 27, it is now at the periphery of that territory with an RSI of 31. In the short term, the range between 4.1260 and 4.2565 will be one to look out for. Even with a further rebound, copper price will likely find resistance at 4.2980. On the flipside, further strengthening of the US dollar in the ensuing sessions may give the bears an opportunity to reach a new YTD low of 4.0575.

copper price
copper price
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