Copper Price fades corrective pullback from multi-month low as recession fears loom

Copper Price, per the COMEX Futures, returns to the bear’s desk as the red metal drops back towards the multi-month low marked the last week heading into Wednesday’s European session. That said, the commodity drops to $3.73, down 0.65% while the three-month copper futures contract on the London Metal Exchange (LME) was down 0.5% at $8,385 a tonne by the press time.

The downbeat US dollar and positive headlines from China managed to trigger the industrial metal’s corrective pullback in recent days. However, looming concerns over the economic growth and the US dollar’s rebound drowned the quote afterward.

The metal managed to cheer China’s reduction of covid-linked quarantine time for travelers, as well as hopes of the Sino-American trade talks, in recent days. Additionally, downbeat US data also helped the metal to rebound from the multi-month low.

However, Tuesday’s jump in the one-year US consumer inflation expectations joined hawkish Fed bets to renew the recession fears and weigh on the metal prices. The US Conference Board (CB) Consumer Confidence Index dropped for the second consecutive month in June, to 98.7 versus 100.0 expected and 103.2 in May. In doing so, the widely followed consumer sentiment gauge dropped to the lowest level since February 2021. Further details revealed that the one-year consumer inflation rate expectations climbed to 8% from May's revised print of 7.5. It should be noted that the US trade deficit dropped to the lowest in a year, to $104.3 billion, per the latest release for May.

Elsewhere, the geopolitical concerns surrounding China and Russia also weigh on the metal prices. Amid these plays, Standard Chartered wrote in a note, per Reuters, “The base metals complex has been under pressure from a challenging demand outlook owing to China's COVID lockdowns and broader macro concerns over monetary policy tightening and growth fears.”

The US bank also adds, “However, micro fundamentals for the complex remain broadly supportive, given output disruptions, supply dislocations and relatively thin exchange inventories.”

Moving on, the US Core Personal Consumption Expenditure (PCE) for Q1 2022, expected to remain unchanged at 5.1%, will join the final readings of the US Q1 GDP, likely to confirm a 1.5% Annualized contraction, to highlight additional catalysts for clear directions. Above all, monetary policy discussions among the central bankers from the US, the UK and European Union (EU) at the ECB Forum will be crucial to watch.

Technical analysis

Copper prices remain vulnerable to declining further unless bouncing back beyond the late 2021 low near $4.00. That said, 50% Fibonacci retracement of 2020-22 upside, around $3.55, lures the bears of late.