Slowdown fears underpin worst week in a year despite recent rebound from $3.72

  • Copper prices are dribbling around the lowest level since the start of 2021.
  • Fitch cites recession woes, central bank action and China to expect further losses.
  • The resolution of labor issues in Chile reinforces the downside bias.
  • Light schedule, calm session triggers a corrective pullback but the bears keep the reins.

The price of copper remains down, indicating the worst week of the year, even as the red metal recovers from an 18-month low ahead of Friday’s European session.

That said, copper futures on COMEX are showing daily gains of around 1.30% as the corrective pullback jostles with $3.72 at press time. Elsewhere, the three-month copper contract on the London Metal Exchange (LME) is hovering around the lowest since February 2021 near $8,400, while prices for the most active contract on the Shanghai Futures Exchange (SFE) remain under pressure at around 63,830 yuan per metric ton.

While outlining the challenges for the red metal, global ratings agency Fitch said: “We expect base metals to extend losses after their recent fall caused primarily by Fed tightening and economic slowdown. of China on the back of the country’s zero COVID policy”.

“A stronger US dollar and weaker global economic growth will lead to a significant drop in demand for base metals. The risks are largely on the downside,” the note also mentions.

It’s worth noting that Fed Chairman Jerome Powell’s recessionary fear joined disappointing US PMI data to weigh on commodities the day before. However, mention of the woes of inflation and recession as challenges to ensure a soft landing, despite firmer growth expected this year, weigh on the US Dollar Index (DXY) thereafter and trigger corrective metal recoil.

Going forward, updates regarding central bank moves and the recession will be important to watch for clear guidance.

Technical analysis

Copper prices are likely to see further declines as the bears managed to conquer the late 2021 low around $3.97. The same is pointing commodity sellers towards the 50% Fibonacci retracement from March 2020 to 2022 on the upside around $3.56. It should be noted that the recovery is above $3.97 and will need to be validated from the $4.00 before aiming further upside.