Copper reacts positively to the Fed’s latest rate hike in this cycle

04 May 2023 175
Copper reacts positively to the Fed’s latest rate hike in this cycle

Yesterday copper tested a local low of mid-March. Now there is a strong rebound, which may continue amid positive sentiments in the commodity market.

As Fed Chairman Jerome Powell suggested in his speech, yesterday’s interest rate increases might be the last in the current cycle. However, he avoided mentioning that the fight against inflation is over.

Nevertheless, these words supported copper, as a willingness to cut rates could save the economy, if the crisis worsens.

The short-term outlook for copper is rather bullish.

A Reuters poll showed that copper prices will slightly rise in the coming months due to low inventories. However, China’s weak physical demand and a threat of a global recession will restrain them.

In January copper prices hit the highest level in 7 months. It was driven by optimism about the recovery of the world’s second-largest economy. Since that moment the metal value has gradually decreased by 10% and continues its decline, as China’s demand fails to meet expectations.

Risks of a supply deficit remain, as some analysts stated.

Oyu Tolgoi is one of the richest copper mines in the world. The difficulties related to the launch of this project indicate a turbulent future for the red metal market.

According to geologist Doug Kirwin, who worked at Oyu Tolgoi, the industry could face a huge crisis. Consumption of copper as the key element for the energy transition is increasing, and producers will not be able to meet demand quickly due to the lack of the required number of rich deposits.

According to the technical analysis, copper is now reversing from the local lows. There is no full reversal yet, but the impulse may continue. The growth target will be around the high, which was reached the day before yesterday near the price of $8,650. This is the resistance level as well, because copper rebounded from it several times. A Stop-loss will be set at moving below yesterday’s low, which corresponds to the price of $8,450.

Copper prices are likely to rise:

Take profit – 8,650

Stop-loss – 8,450

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

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