Copper Prices Recover From Five Month Low, What Next?

Copper prices posted a smart recovery yesterday. After the Biden administration provided encouraging signs on lifting the U.S. debt ceiling, indicating that a compromise with Republican lawmakers may be reached by this week, prices found support as the stance improved.

The red metal dropped below its five-month low in the previous session amid a renewed wave of selling on weaker-than-expected economic data from China as well as increased fears of a U.S. recession this year.

Copper futures settled at $3.7500 a pound after jumping 2.38% on Wednesday. MCX Copper saw a smart recovery from a five-month low of 710.30 and settled at 723.20, up by 1.08%.

Concerns over a potential U.S. debt default were a main driver of anxiety for markets as U.S. lawmakers sparred over reaching an agreement. They also had driven flows into commodity prices earlier this month. The deadline for lifting the United States debt ceiling is June 1, according to Treasury Secretary Janet Yellen.

The dollar continued trading on the upside, hitting a six-week high this week. As a result, this week saw pressure on metal prices as Fed officials provided a hawkish perspective on interest rates.

Technical View

Copper prices turned bearish from 9 May 2023. Prices dropped more than 5% from the peak of 755.45. Recently prices dropped below their five-month low.

However, yesterday prices were able to recover and settled with a gain of 1.08%.

The intraday price action resulted in the formation of bullish piercing line candlestick which is a sign of a trend reversal. However, prices would need to break their immediate resistance of 729.50 to give further recovery. A break above it will expect to recover towards immediate resistance 735-742.50.

Alternatively, any rise towards 728.00-727.50 will put pressure again. And prices may retreat towards 718-710 again.

Adding to this, U.S. debt ceiling woes and Fear of Economic slowdown will drive sentiment in the near future. Prices continue to remain volatile unless the picture will clear.