Weekly Outlook on Copper- 2 June 2023

MCX copper prices have been rising consecutively for the last three days, supported by unexpected growth in factory activity in China and a vote of approval from the U.S. House of Representatives to suspend the debt ceiling. Production in Chile fell more than 5% in April from the prior month and output was down 1% from a year ago, according to data released Wednesday by the national statistics agency. While the year-over-year decline was insignificant on its own, it is coming from a low base after output slumped in 2022.

Economists at ING expect copper prices to remain volatile as the market may continue to react to any policy change from China as well as the Federal Reserve's decision on the interest rate path.
 

                             Copper prices recover on short-covering amid weaker Dollar and slowing economic growth                                    

In the longer term, improvement in the fundamentals as an EV & green energy metal will support prices over the next few years, but for now, the price may remain under pressure due to sluggish demand and slower economic growth in China.

Technically, copper prices showed further short covering after a steep fall in prices from the last couple of weeks. The price witnessed a more than 6% correction last month and tested the lowest level at 693 since Jan. 2023. On the daily timeframe, the prices are still trading below 200-day Exponential Moving Averages with lower highs and lower lows that indicate weakness in the counter. However, a momentum reading shows slight improvement from the oversold zone with a positive crossover. Prices are also finding resistance at Middle Bollinger Band formation on the daily scale.
 

Hence, based on the above structure, we are expecting limited upside movement in copper for the coming days as this short covering move may continue till 733/735 levels. So traders are advised to trade cautiously and can follow the buying strategy just to play the pullback move. 

Important Key Levels: