Is copper gearing up to gain 2%-3% in the near future?

A drastic fall in the U.S. dollar resulted in a significant recovery in copper prices yesterday. Prices posted their biggest intraday gains after 13 June 2023 and jumped towards a three-week high.

Following the lower-than-expected US CPI data, where headline inflation came in at 3.09% (Y/Y%) instead of the prior 4.13% and our forecast of 3.45%, the dollar experienced a strong decline.

Bets that this year’s global economic growth will not decrease as much as previously anticipated were sparked by U.S. inflation figures. U.S. data released on Wednesday indicated a little increase in consumer prices in June. recording the least significant annual growth in more than two years. Markets expect one more interest rate rise, but traders hope that may be it. Because higher rates can slow economic growth and reduce industrial metals demand.

The biggest copper importer in the world, China, is rumoured to be implementing further stimulus programmes to aid a sluggish economic recovery, which helped to bolster the red metal.

Chinese official media channels repeatedly reported that the administration was close to announcing additional budgetary spending.

Today, a Bunch of U.K. economic data including GDP, Industrial production, Trade balance and China Trade numbers are set to be released. All numbers will have a significant impact, as any favourable data will add further gains or vice versa.

Technical Outlook

Copper prices witnessed a 1.37% gain, which was the biggest intraday gain since 13 June 2023. Prices rebounded from the day’s low of 718.30 and made a high of 729.85 before settling at 728.35.

On the above chart, prices have broken up their inverted head and shoulder pattern resistance, which indicates bullishness in the near future. Adding to this, prices also cross their  200 DMA pointing to aggressive buying.

In the near future, a break above 732.50 appears to set a fresh buy in the prices. Traders may go long with a stop loss below 720.50. Target 745.00-755.00.

Alternatively, on the downside crucial support is seen at 714.50 and a break below only prices may retreat towards 708-700.