Copper price is scaling gradually higher after concluding its correction to near $3.4020. The base metal is aiming to capture the crucial resistance of $3.50 as escalating production cuts have soared supply worries. On a broader note, the asset has rebounded firmly after refreshing the monthly low near $3.3600. The rebound still lacks clarity, therefore, the odds of a resumption in the downside journey will remain intact.
Major catalysts for a rebound in copper prices are the stimulus packages promised by the Chinese administration, the decline in copper production in Peru, and a steep fall in the US dollar index (DXY).
The investing community is aware of the fact that the Chinese economy is going through a severe slowdown due to China plus one approach by Western leaders, a decline in economic activities due to lockdown curbs to contain the Covid-19 spread, and a falling inflation rate. To tackle the headwinds, the economy is pouring liquidity into the economy. The administration has already announced stimulus packages to scale up economic activities, which will kick-start this quarter. Also, the Covid-19 cases have trimmed dramatically.
Meanwhile, the statistics department of Peru's economy has reported a decline in copper output for July month. The copper output has been trimmed by 6.6% on an annual basis as two of their largest copper mines Compañía de Minera Antamina S.A. and Southern Peru Copper Corporation have reported a decline in productivity.
On the dollar front, the US dollar index (DXY) witnessed a steep fall after the release of the minutes from the Federal Reserve (Fed) Beige Book. The DXY is expected to remain lackluster ahead of the speech from Fed chair Jerome Powell. Investors should brace a hawkish stance on interest rate guidance.
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