Copper Price Forecast: Recovery or a Rally-Sell Opportunity?

Copper prices recently fell to three-month lows after a resurgent US Dollar, and safe-haven-induced selling of risky commodities put downward pressure on prices. However, the recent decline has brought out Chinese buyers seeking to capitalize on prices that have fallen as much as 30% from their multi-year peaks. This has paid some dividends on the day, as copper price action saw a push to the north by 2.19% as of writing, fighting off session lows in the process. 

Chinese imports of copper rose 9.8% in the first eight months of 2022, representing the most robust import volumes since the pandemic broke out in 2020. It was also a year-on-year increase of 200,000 tonnes from the same period a year earlier. Imports of copper scrap and mined concentrates are also on the rise. 

While this renewed buying may force copper prices up in the short term, there are still significant headwinds the red metal must contend with. A rising dollar means that copper purchases are getting more expensive. With the US Federal Reserve poised to raise rates further in the last two meetings of the year (considering recent comments by Fed members like James Bullard), it will only get more expensive. Manufacturing PMI data also show that business activity around manufacturing has not recovered. 

The Chinese purchases are likely more for storage than for industrial utilization. The recent uptick may be temporary, and a renewed slide may be on the cards barring any supply woes. Research agency Fitch Solutions Country Risk and Industry Research has called for a Q4 2022 price of $7,500 per tonne, which translates to $3.4019/pound.

Copper Price Forecast

The intraday uptick is now challenging the resistance at 3.3650 (18 July high and 6 September low). A break of this level continues the recovery, targeting the 3.5220 resistance (28 July and 22 September 2022 high). There are additional upside targets at the 3.7345 resistance (23 August high) and the 3.8340 upside barrier (28 June high), but these are only attainable if the bulls successfully uncap the 3.5220 price mark.

On the other hand, rejection at the 3.3650 resistance provides the bears with an opportunity to force a downward move, which challenges the intraday low and the former lows of 24 November 2020 and 21 July 2022 at 3.2580. If the bulls fail to defend this pivot, the 3.1190 price support (21 September 2020 high and 12 November 2020 low) becomes the next downside target. Further price deterioration makes the 3.0340 price mark (14 October 2020 and 3 November 2020 lows) a new harvest point for the bears. 

XCU/USD: Daily Chart