Copper shows weakness amid increasing inflation

03 March 2023 166
Copper shows weakness amid increasing inflation

Copper price demonstrates the weak dynamics against gold. The weakness of red metal looks strange amid the growth of Chinese business activity in February to more than a 10-year-high. Chinese data shows a strong economic recovery, which should have a positive effect on the metal. China imports more than half of the world's copper.

The uncertainty factor may reveal itself before the weekend. The annual National Congress of the Chinese Communist Party is scheduled on Sunday, where the economic goals will be set, and new top officials will be appointed. The meeting will discuss China's new five-year plan for 2026-2030.

Also, the weakness of copper can be influenced by the U.S. economy. US jobless claims data showed that the labor market is still strong, and labor costs continue to rise. The Fed is expected to continue raising interest rates to curb inflation.

The growth dynamics of German consumer prices exceeded expectations in February. Thus, the European Central Bank (ECB) will be forced to continue tightening its rhetoric regarding the rate. Other EU countries also reported that price growth exceeded the analysts' forecasts for February. Consumer prices rose by 9.3% compared to last year. The service sector and food products contributed to inflation the most. The annual increase in consumer prices was at the level of 9.2% in January. Inflation in the EU also puts pressure on copper.

According to the technical analysis of copper prices, there was an attempt to exit down from the uptrend, which turned out to be unsuccessful. We assume that another attempt of reduction will be made amid the weakness against other precious metals. After all, this level has already shown its weakness earlier. For example, the upper limit of a downtrend remains impregnable for bulls.

In this case, the low level of metal trading will be a target, which corresponds to the price of $8,800. We will place a stop-loss when leaving above the downtrend near $9,111.

Decrease in copper price:

Take profit — 8800

Stop-loss — 9111

This content is for informational purposes only and is not intended to be investing advice.

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