Copper prices bounced on Thursday, due to weakness in the Dollar Index, however demand concerns due to upcoming holidays in China, rapidly expanding global coronavirus cases and resurgence of cases in China, are likely to keep a lid on prices. We expect Copper prices to remain under pressure, while below the key resistance level of $8,120 per mt.
Market sentiments are affected due to logistical issues in COVID-19 vaccinations, which have deserted hopes for a speedy recovery in the global economy.
On the economic data front, the US economy contracted at its sharpest pace since World War Two in 2020. As per official data released yesterday, US GDP increased at a 4% pace in the fourth quarter against market forecast of 4.3%. Also the Labour Department reported that first-time claims for jobless benefits totalled 847,000 last week, better than the market expectations of 875,000.
Meanwhile, Copper stocks in LME warehouses are at their lowest since September at 76,250 mt, as on Jan. 28, 2021. Copper inventory has dropped by 109,050 mt in the last one year. Meanwhile, SHFE Copper inventory has dropped by 52,000 mt in the last one year and now stands at 20,635 mt, as on Jan. 28 2021.
Also, the LME copper net speculative long has declined to 35% of the open interest from a January peak of 46%. Longs on Comex copper have also eased from recent highs.
Chilean Copper Commission (Cochilco) said on Thursday that it had raised its projection for the price of copper for this year to $3.30 per pound amid progress in vaccination campaigns against COVID-19, as well as good prospects for the Chinese economy.
Copper prices are likely to trade firm, while above the key support level of the 50-days EMA of $7,725 per mt, and the 100-days EMA of $7,337 per mt. Meanwhile, key resistance is seen near the $8120 level.