Copper price forecast after hitting a fresh YTD low

Copper price has extended last week’s losses to trade at its lowest level year-to-date. The red metal is hovering around a zone last hit in mid-August 2021. As at the time of writing, it was trading at $3.98. The value of the US dollar and concerns over global economic growth are set to be key drivers in the new week.

Fundamentals

On the one hand, a strong US dollar, slowed global economic growth, and concerns over the probability of a recession continue to weigh on copper price. Amid the heightened inflationary pressures, the US Treasury Secretary, Janet Yellen noted that slowed growth in the largest economy will likely continue in coming months.  

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During an interview on ABC’s “This Week”, Yellen stated, “I expect the economy to slow. It’s been growing at a very rapid rate and the economy has recovered and we have achieved full employment. We expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable”.

While the bearish outlook will likely continue in the week, the easing of coronavirus lockdowns in China and the subsequent improvement of the market sentiment may help curb losses. According to UBS Global Wealth Management’s regional CIO, Yifan Hu, “the worst is over”. During an interview on Blommberg Markets on Monday, the expert noted that the situation in the second-largest economy and leading consumer of industrial metals is set to improve further in June and beyond.

Copper price technical forecast

Copper price has begun the new week on its back foot; extending last week’s losses. About two-and-a-half weeks ago, the red metal rebounded to a six-week high at 4.58. Nonetheless, the bulls lacked enough momentum to break out of the crucial support-turn-resistance zone of 4.50.

With the subsequent decline, the bulls are now keen on defending the psychological support level of 4.00. Earlier in Monday’s session, it hit an intraday low of 3.97.

As shown on a daily chart, copper price is trading below the 25 and 50-day exponential moving averages. As the week unfolds, I expect it to remain on a downtrend despite the probable rebound. Even so, its losses will likely be curbed by the improving sentiment of the Chinese market.

In particular, failure by the bulls to defend the current support zone of 4.00 will give the bears an opportunity to retest the 15-month low of 3.85. On the flip side, a rebound from the psychological support level of 4.00 will likely place it within a range with 4.12 as the upper border. Past that level, it may still trade below the 25-day EMA at 4.25 for the remainder of the week.