Copper price is back above the crucial level of $4.50 after momentarily dropping below it on Thursday. The red metal is finding support in the tight supply outlook. Stocks at LME-registered warehouses have dropped from over 250,000 tonnes in August 2021 to 83,800 tonnes. In the warehouses monitored by Shanghai Futures Exchange, inventories are close to its 2009 low at 29,182 tonnes.
In 2022, analysts expect the green transition to further boost demand. In 2020 and 2021, copper price surged by 26% and 25% respectively. The bullish demand outlook has heightened supply concerns.
At the same time, a weaker dollar has made it less expensive for buyers holding other currencies; an aspect that creates a favorable environment for the metal’s prices. The value of the greenback tends to have an inverse correlation with commodity prices. At the time of writing, the dollar index was down by 0.07% at $94.79. Since the beginning of the week, it has dropped by about 1.50; hitting a two-month low earlier on Friday.
Copper price prediction
As at 1036 GMT, COMEX copper futures were down by 0.33% at $4.53 per pound. Despite the recent pullback, the red metal is still trading above the psychologically crucial level of 4.50 after the bears’ unsuccessful attempt to push it below that level in early Friday trading.
Since the beginning of the week, copper price has risen by 4.58%. On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages. It is also above the long-term 200-day EMA. Based on both the technicals and fundamentals, the metal will likely record further gains in the ensuing sessions.
Based on the bullish outlook, it will probably find support along the 25-day EMA at 4.49 as the bulls defend the crucial resistance-turn-support zone of 4.50. Subsequently, it may trade within a horizontal channel as the bulls gather enough momentum for further rallying. The channel’s upper border will likely be at the week’s high of 4.60. A move above that level will have the bulls eyeing the upper target of 4.67. However, this thesis will be invalidated by a move below the 50-day EMA at 4.45.