Copper Price buckles As Bearish Sentiment gains weight

Summary:

The Comex Copper price is set to finish the week lower as traders reduce exposure ahead of a potentially volatile week-long Chinese Holiday.

The Comex Copper price is set to finish the week lower as traders reduce exposure ahead of a potentially volatile week-long Chinese Holiday. Comex High-Grade Copper futures are trading at $4.1705, down 2.65% on the week, 15% below the April all-time high of $4.8880.

At the start of the year, supply disruptions, loose monetary policy and a global decarbonization push caused Comex copper to surge to its highest ever price. But over the last few months, several bearish developments have emerged. As a result, Copper is starting to look vulnerable to a correction.

Due to the country’s energy crises, Chinese factory activity in September slowed for the first time since March 2020, leading to a slowdown in Copper demand. Furthermore, Chinese futures traders will be away from their screens next week, leaving the Copper price prone to volatility. This is significant considering the ongoing debt-ceiling negotiations in Washington. Congress can’t agree on a deal to extend the $28.5 trillion spending cap, which could lead to a historic US default on the 18th of October. Although the odds of a default are low, risk assets are starting to roll over, causing the US Dollar to spike to a one-year high, putting further downward pressure on Copper.

Copper Price Forecast

The copper price is below the 50 and 100-day moving averages and grappling with the 200-day at $4.1618. If the price ends below the 200 DMA today, it will confirm yesterday’s breakdown and potentially lead to heavy liquidation next week. Which considering the Chinese holiday, it could gather pace . In that event, the first level of support is a rising trend line from March at $3.9950. Coincidentally, at that level, the weekly chart also starts to look unfavourable. If that happens, Copper could drop another 10% to the December $3.7340 high.

The bearish view relies on the price finishing today below the 200 DMA. Therefore, If the price manages to close the week above $4.1618, it may get a reprieve. Furthermore, a debt-ceiling agreement over the weekend would avert a potential crisis and alleviate some price pressure. On the other hand, if the stalemate persists into next week, the bearish pressure will intensify, and the price action could get ugly.