- Copper prices dribble around the lowest level since early 2021.
- Fitch cites recession woes, central bank action and China to expect further losses.
- Resolution of labor issues in Chile adds strength to the bearish bias.
- Light calendar, quiet session triggers corrective pullback but bears keep reins.
Copper Price remains on the back foot, pointing to the worst week in a year, even as the red metal recovers from of 18-month low heading into Friday’s European session.
That said, the copper futures on COMEX print around 1.30% daily gains as corrective pullback jostles with $3.72 by the press time. Elsewhere, the three-month copper contract on the London Metal Exchange (LME) seesaws around the lowest since February 2021, close to $8,400, while prices of the most active contract on the Shanghai Futures Exchange (SFE) remain pressured at around 63,830 yuan per metric tonne.
While portraying the challenges for the red metal, the global rating agency Fitch said, “We expect base metals to extend losses following their recent fall caused principally by the Fed's tightening and China's economic slowdown on the back of the country's zero-COVID policy.”
“A stronger U.S. dollar and weaker global economic growth will cause a significant drop in demand across base metals. Risks are broadly skewed to the downside,” the note also mentioned.
It’s worth noting that, Fed Chair Jerome Powell’s concern for recession joined downbeat US PMI data to weigh on the commodities the previous day. However, the mentioning of inflation and recession woes as the challenges to ensure a smooth landing, despite expecting firmer growth this year, weigh on the US Dollar Index (DXY) afterward and triggered the metal’s corrective pullback.
Looking forward, updates concerning central bank moves and recession will be important to watch for clear directions.
Copper prices are likely to witness further declines as bears managed to conquer the late 2021 swing low surrounding $3.97. The same directs the commodity sellers towards the 50% Fibonacci retracement of March 2020 to 2022 upside, around $3.56. It’s worth noting that the recovery moves past $3.97 and will need validation from the $4.00 before eying further upside.
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