Copper prices remained steady on Wednesday, hovering near a two-week high, as traders positioned ahead of the Federal Reserve's interest rate decision and the release of the US PCE inflation index. The metal has gained more than 15% year-to-date, supported by supply concerns and tariff uncertainties, though a firmer dollar has tempered further upside.
Supply and AI Demand Underpin Copper
Supply disruptions and steady Chinese demand have been key drivers for copper. Freeport-McMoRan reported third-quarter adjusted earnings of 88 cents per share, beating analyst estimates of 81 cents, as higher copper prices offset a production decline at its Grasberg mine in Indonesia. Similarly, Southern Copper Corp posted record quarterly net income and sales, exceeding expectations.
In Australia, a mining-heavy economy, copper's strength has lifted mining stocks. The country's equity market often takes cues from industrial metals, and copper's recent performance has been a positive signal.
Investor sentiment has also been buoyed by the AI trade recovery, with the Anthropic IPO filing improving confidence ahead of earnings from major tech companies like Microsoft and Alphabet. Copper's extensive use in electrical and industrial applications makes it a critical component in AI infrastructure expansion.
Dollar Strength and Fed Focus
Despite these bullish factors, a stronger US dollar has capped copper's gains. The dollar index rose for a fourth consecutive session on Wednesday, reaching its highest level in two weeks. Market attention is now on the Federal Open Market Committee (FOMC) statement later today and the PCE price index due Thursday.
With inflation concerns elevated, a hawkish tone from the Fed could bolster the greenback, putting pressure on dollar-denominated commodities like copper. As a bellwether for global economic health, copper's price movements remain sensitive to the Fed's policy stance and broader market sentiment.
Technical Outlook: Range-Bound Trading
On the daily chart, copper appears range-bound in the short term, with traders awaiting a fresh catalyst. The key support level is the 50-day exponential moving average (EMA) at $6.59. Holding above this zone would keep copper above its months-long trendline.
The immediate trading range is between $6.59 and resistance at $6.69, with further gains likely capped at $6.72. On the downside, a break below $6.59 could push the metal back below the trendline, opening the door for a retest of the lower support at $6.52.
As the market digests the Fed's decision and inflation data, copper's direction will likely hinge on the dollar's trajectory and any signals on future rate moves. A dovish surprise could weaken the dollar and support copper, while a hawkish stance may trigger a pullback.
This article is for informational purposes only and does not constitute financial advice.
