Copper price analysis as US strike on Iran tests market optimism

Copper price edged higher on early Tuesday before erasing most of those gains. The US military strikes on southern Iran are testing the optimism that has driven the broader market in recent sessions. While the headlines on the US-Iran peace talks continue to shape its price movements in the near term, AI-driven demand has steadied the medium-to-long-term support. Despite the geopolitical and economic uncertainties, copper price is set to continue trading within the months-long bullish channel. 

Copper price finds steady support amid the uncertainties

Copper price is finding support in the hopes that the US-Iran peace talks may soon yield a memorandum of understanding (MoU). At the start of the week, Trump asserted that a peace deal with Iran has been “largely negotiated” and will be announced soon. 

The optimism led to a decline in crude oil prices and the US dollar while bolstering the dollar-priced red metal. While that optimism continues to support the market, it is being tested by the latest US strike on Southern Iran. The attack, which Washington terms as “self-defense” targeted Iranian mine boats and missile launch sites. This comes at a time when the top Iranian negotiators are headed for Qatar for the peace talks. 

The uncertainties have curbed copper price gains as Brent oil and the US dollar recorded subtle gains. In the previous session, Brent oil dropped below the support level of $99 for the first time in over a month. 

Beyond the headlines on the US-Iran peace talks, copper price is finding support from the rallying of the tech stocks. More specifically, it has been moving in tandem with the AI tech stocks as investors bet on heightened demand from AI data centers. 

On Tuesday, the fear & greed index was at a greed level of 59. This is a slight surge from the previous session’s 58; indicating improved risk appetite. Subsequently, the tech-heavy Nasdaq 100 index rallied to its highest level in close to two weeks. As part of this surge, Micron rose to a two-week high while Meta Platforms traded at a one-week high. 

Copper price has been moving in tandem with AI tech stocks as the growth of the AI industry bolsters the copper demand outlook. The highly conducive metal rose to a fresh record high about two weeks ago as the Nasdaq 100 index also rallied to an all-time high. In the same breath, the easing of the AI-related equity to a two-week low last week saw Comex copper price erase some of the gains made earlier in the month. 

Comex copper price technical analysis

Copper price chart | Source: TradingView

Copper price edged higher on early Tuesday before erasing most of the gains. Even with the volatility, it has maintained the bullish momentum accrued over the past three weeks. 

Earlier in the day, the red metal extended its previous gains to trade at its highest level since 15th May before pulling back. At the time of writing, it was at $6.39 as it hovered around the support level of $6.38.

A look at its daily trading chart points to subtle gains in the near term as it approaches the crucial resistance zone of $6.50. On the one hand, it is trading above the 25 and 50-day EMAs. However, its relative strength index (RSI) is at 58. While it still has room to rally higher, it may lack enough momentum to approach the overbought territory. Besides, it will likely face resistance along the upper border of the months-long bullish channel.

Based on these technical indicators, and the fundamentals, a move above the current resistance zone of $6.50 may curb its gains at $6.58. On the lower side, the support level at $6.28 is worth watching. Below that range, $6.20 will likely offer steady support to the red metal.