Investing.com - Copper prices inched lower on Wednesday, one day after rallying to the highest level of the year on hopes for more monetary easing out of China.
On the Comex division of the New York Mercantile Exchange, copper for July delivery shed 0.7 cents, or 0.24%, to trade at $2.928 a pound during European morning hours. Futures held in a tight range between $2.922 and $2.947.
A day earlier, copper rallied to $2.956, the highest level since November 28, before settling at $2.935, up 1.4 cents, or 0.5%. Futures were likely to find support at $2.875, the low from May 1, and resistance at $2.956, the high from May 5.
Prices of the red metal have been well-supported in recent weeks amid mounting speculation policymakers in China will have to introduce further stimulus measures to jumpstart the economy amid lackluster growth.
Since November, the People's Bank of China has introduced a series of stimulus measures, including lowering interest rates twice and cutting the reserve requirement ratios of major banks twice, in order to spur economic activity and boost growth.
The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption.
Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.25% to trade at 95.04 early Wednesday.
The drop in the dollar came after the Commerce Department said Tuesday the trade deficit widened by 43.1% to $51.4 billion in March, the largest since October 2008, due to a jump in imports.
The trade gap was far larger than assumed in the government’s initial estimate of first quarter growth last week, fuelling fears that the U.S. economy may have contracted in the first three months of the year.
A recent run of disappointing U.S. economic data dampened optimism over the recovery, fuelling speculation the Fed could delay hiking interest rates until late 2015, instead of tightening midyear.
Elsewhere, gold futures for June delivery dipped $2.40, or 0.2%, to trade at $1,190.80 a troy ounce, while silver futures for July delivery slumped 12.6 cents, or 0.76% to trade at $16.45 an ounce.
Investors were looking ahead to the ADP report on private sector jobs growth for April later in the day, as well as a speech by Federal Reserve Chair Janet Yellen, which would be closely watched for any indications on the timing of the first hike in interest rates.
Traders were are also waiting for Friday's U.S. nonfarm payrolls report for further clues on when the Fed may raise interest rates.
A strong U.S. nonfarm payrolls report was likely to bring forward expectations on when the central bank will begin to raise rates, while a weak number could weigh on the dollar by undermining the argument for an early rate increase.