Copper Price Forecast: Has the Red Metal Found Its Bottom?

• The copper price is under pressure as the US dollar remains strong.
• Investors are eyeing industrial production data from the US and China in the coming week.
• The metal’s price may have reached its bottom as analysts forecast a trend reversal in the coming months.

Analysts’ outlook

In 2021, analysts predicted a commodities supercycle that would extend into 2022 and beyond. Notably, copper was one of the beneficiaries of this bull market as more countries became more aggressive in achieving their goals regarding the green economy. Subsequently, Goldman Sachs termed the red metal as the “new crude oil.” 

At the beginning of 2021, COMEX copper futures were at around $3.5000 per pound. True to the forecast, its rallying continued into the new year, surging past the psychological level of $5.0000 for the first time on record. Interestingly, it has since dropped to a fresh year-to-date low of $4.0400 on Thursday, its lowest level since September 2021. It has since bounced back to $4.1405 as of the time of writing.

Even so, analysts maintain that copper price will revive its uptrend in the coming months. According to Commerzbank, the recorded downtrend in industrial metals’ prices is “excessive.” As such, it forecasts higher copper prices once the current correction ends. 

Goldman Sachs is also bullish on the commodity. About a month ago, the investment bank indicated that higher copper prices “are an inevitability.” Indeed, it forecasts that the red metal will hit a fresh record high by mid-year. With these predictions in mind, investors are looking to see if the commodity has reached its short-term bottom.

Bearish drivers

Despite this bullish outlook, there are concerns that a strong US dollar and global growth woes will continue to weigh on copper price in the short term. Earlier in the week, the released data showed that Chinese exports growth declined to 3.9% in April compared to the prior month’s 14.7%. 

COVID-19 lockdowns have impacted factory activities in the leading consumer of industrial metals and second-largest economy. This has added to concerns over the stability of the global economy amid heightened inflation and supply chain disruptions. In the ensuing sessions, investors will be eyeing industrial production data from the two leading economies; the US and China. 

Besides, a strong US dollar is also exerting pressure on the red metal. Similar to other commodities that are priced in the currency, copper price tends to move inversely to the value of the greenback. The ongoing inflationary pressures and prospects of aggressive policy tightening by the Federal Reserve boosted the dollar index to a 20-year high of $104.96 on Thursday. At the time of writing, it was at $104.51. 

Copper price forecast

After being in a downtrend for about three weeks now, the copper price extended its losses to a fresh year-to-date (YTD) low of 4.0400 on Thursday. At that level, it was in the oversold territory with an RSI of 26. It has since bounced back and is now at the periphery of that zone with an RSI of 30.

On a daily chart, it is trading below the 25 and 50-day exponential moving averages. While I forecast a trend reversal in the coming months, I expect the copper price to remain under pressure in the short term.

In particular, the range between 4.1220 and 4.2450 will be one to look out for. A pullback may have it find support at the week’s low of 4.0400. At that level, I expect it to have found its short-term bottom even as it remains on a downtrend in the ensuing sessions.