Copper prices face hurdles around $3.50, upside looks likely despite lockdown fears in China

• Copper prices are expected to extend their gains after overstepping the critical hurdle of $3.50.
• The asset is aiming higher despite the accelerating lockdown fears in China.
• The arrival of the monsoon in Asia is not impacting the copper bulls.

Copper price, as per the COMEX Futures, has given an upside break of the consolidation range of $3.27-3.46 formed in the past two trading sessions. The base metal futures have displayed a sheer upside to near the psychological resistance of $3.50 and are expected to display more gains after establishing above the same.

The asset is scaling higher despite the escalating lockdown fears in China. The resurgence of Covid-19 is indicating a halt in economic activities. The restrictions on the movement of men, materials, and machines will result in lower production activities and also lower demand for durable goods. Therefore, the demand for copper will fall significantly and may face barricades on elevated levels.

On the demand side, China announced a state infrastructure investment fund that would be worth the Chinese Yuan (CNY) 500 billion ($74.69 billion) to boost infrastructure spending and to bring a revival to the flagging economy, as per Reuters. The usage of copper in infrastructure building remains extremely high and higher infrastructure development in the Chinese economy will spurt the demand for copper.

Meanwhile, investors are worried about the arrival of the monsoon in Asia. The demand for base metals slips firmly in monsoon as construction activities and real estate development get halted.  

On the dollar front, the US dollar index (DXY) is facing a mild correction after printing a high of 107.24. This has also supported the copper bulls. A slippage in the DXY has underpinned the risk-on impulse for a while.