Copper futures opened the week on a firm footing, extending last week's advance as the market weighs persistent supply constraints against robust demand from China. The red metal has been hovering near its all-time high, supported by tariff-driven stockpiling by US buyers and dwindling inventories at major exchanges. However, a stronger US dollar has tempered gains, and short-term technical signals suggest the market may be entering a consolidation phase.
Supply tightness and Chinese demand underpin bullish outlook
Copper hit a fresh record high roughly two weeks ago, propelled by concerns over supply disruptions and aggressive restocking by Chinese industrial consumers. Inventories at LME and Shanghai warehouses have been shrinking, while US buyers have been hoarding metal ahead of potential tariffs. This supply/demand imbalance remains the primary driver for copper prices in the near term, with many analysts expecting the tightness to persist.
Despite the bullish fundamentals, volatility is likely to increase near the highs. Without a clear breakout above resistance or a decisive break below key support, copper may trade sideways in the coming sessions. Additionally, the dollar's strength is expected to limit upside for dollar-denominated commodities, as a firmer greenback makes them more expensive for holders of other currencies.
Dollar strength and macro uncertainties weigh
The US dollar index was trading around 100.39 at the time of writing, close to the seven-week high of 100.57 reached on Friday. Investors are digesting the Federal Reserve's hawkish stance, while geopolitical tensions in the Middle East add to global uncertainty. As a bellwether for economic health, copper prices are sensitive to such macro headwinds, which could act as a bearish counterweight to the supply-driven rally.
Technical analysis: mixed signals
On the daily chart, Comex copper futures have posted five consecutive sessions of gains, reaching their highest level in nearly two weeks. The price remains above both the 25-day and 50-day exponential moving averages (EMAs), with a bullish golden cross from mid-April still intact. The asset has also reclaimed a key multi-month trendline, and the Relative Strength Index (RSI) at 58 suggests there is room for further upside before hitting overbought conditions.
In the short term, $6.60 per pound is likely to provide solid support as bulls aim to retest the record high. The current price action may lead to a consolidation phase between $6.60 and $6.83 before the next leg higher. A decisive move above $6.90 would confirm a breakout, while a drop below the trendline could invalidate the bullish thesis and expose the 50-day EMA at $6.54.
At the time of writing, copper was trading at $6.78 per pound, up 1.27% on the day. The market remains sensitive to shifts in dollar sentiment and geopolitical developments, which could trigger sharp moves in either direction.
This article is for informational purposes only and does not constitute financial advice.
