Copper price marches towards $3.40 as DXY skids and supply crunch escalates

• Copper prices are advancing towards $3.40 as DXY has extended losses ahead of Fed policy.
• Dismal Walmart earnings have joined hands with lower US Consumer Confidence to weaken the DXY.
• A halt in production and expectations of a revival in demand has supported the base metal.

Copper price, as per the COMEX Futures, is witnessing a firmer rebound after defending the critical support of $3.36 in the Asian session. On a broader note, the base metal has remained firmer and is likely to recapture its three-week high at $3.46. The base metal market has displayed signs of recovery as the US dollar index (DXY) has displayed a subdued performance in the recent trading sessions.

In the Asian session, the DXY has given a downside break of the inventory distribution formed in a narrow range of 107.00-107.10 as investors have discounted the likely interest rate elevation by the Federal Reserve (Fed). Apart from that, renewed slowdown concerns in the US economy have trimmed the appeal for the DXY and have supported the risk-sensitive assets. The US Consumer Confidence has dropped below 96 and dismal Walmart earnings are indicating a slowdown in retail demand.

A real trigger that has supported the copper prices is the suspended copper production by Chinese miner MMG Ltd due to a long protest at its Las Bambas mine in Peru, as reported by Reuters. At times, when monsoon seems over in the major provinces of China and other nations in Asia, a halt in copper production has triggered copper prices. Lower supply will cater to the higher demand only at premium prices.

Also, the growth rate of Covid-19 in China is stable now, which has trimmed the odds of a severe lockdown. Stagnancy in the growth rate of Covid-19 indicates that the pandemic will be at its peak sooner and there is will no restrictions on economic activities.