Weekly Outlook on Copper- 25-Sep-2023

Copper witnessed a significant decline of -1.3%, trading at 715, primarily due to the strengthening dollar and increasing metal inventories. LME inventories surged to their highest level since May 2022, reaching 162,900 tons. 

Copper price slips lower amid higher dollar and inventory concerns

On the supply-demand front, the global refined copper market showed a deficit of 19,000 metric tons in July, a decrease from June's 72,000 metric tons deficit, according to the International Copper Study Group (ICSG). However, for the first seven months of the year, the market was in a surplus of 215,000 metric tons, compared to a deficit of 254,000 metric tons during the same period the previous year. 

The outlook of a hawkish Federal Reserve and growing concerns about economic growth in Europe were mentioned as factors continuing to pressure industrial activity. This was reflected in months of contractionary manufacturing Purchasing Managers' Index (PMI) data. The decline in copper futures was attributed to renewed pressure from a strong US dollar and weak industrial sentiment globally. A strong dollar can make commodities like copper more expensive for foreign buyers, potentially reducing demand.
 

On the COMEX division, the price has been trading below the 50-day Simple Moving Average and holding immediate support at $3.55; below that price may extend the selling pressure towards $3.30 & $3.22 levels, which will act as a support zone for copper prices. However, on the upside, $3.95 may act as resistance for the prices. 

On the MCX front, copper prices plunged more than 2% on a weekly basis and moved below the support of 722 or 61.8% Retracement Levels of its prior rally. Moreover, the price has also traded below 100-Days Exponential Moving Averages and the Ichimoku Cloud formation suggests more bearishness in the counter for the coming week. However, a momentum indicator RSI (14) and William’s %R are hovering near oversold territory with negative crossover. On the daily timeframe, the copper has also given Symmetrical Triangle breakdown, which suggests selling signals. Hence, one can look for a sell-on rise strategy for the coming week.

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