Copper price stays firmer on stimulus hopes, softer DXY

• Copper price prints three-day uptrend, extends bounce off six-week low.
• Cautious optimism weighs on the US dollar, underpins hopes of recovery in metal’s market.
• China, Europe and the UK are up for more stimulus to avoid recession fears.

Copper prices extend the latest recovery moves, picking up bids to 3.4578 during the three-day uptrend ahead of Tuesday’s European session.

Elsewhere, the three-month copper on the London Metal Exchange (LME) rose 0.3% to $7,678 a tonne by 02:59 GMT and the most-traded October copper contract on the Shanghai Futures Exchange (SFE) advanced 1.3% to 60,850 yuan ($8,773.45) a tonne, said Reuters.

In doing so, the red metal cheers the market’s firmer sentiment and expectations of more stimulus, especially from China. Also keeping the metal buyers hopeful is the softer performance of the US Dollar Index (DXY) after it refreshed the 20-year high the previous day.

While portraying the mood, the US 10-year Treasury yields rise 2.5 basis points (bps) to 3.21% whereas the S&P 500 Futures extend the week-start recovery to 3,943, up 0.50% intraday by the press time. Further, the market’s consolidation also allowed the DXY to retreat from the 20-year high to 109.37, before a recent rebound to 109.62.

Chatters surrounding more aid packages to propel economic recovery seem to have favored the optimists during the full markets. That said, the incoming UK PM Liz Truss is up for a £130 billion energy plan while the People’s Bank of China (PBOC) cuts the Reserve Requirement Ratio (RRR). Further, politicians from Germany/Eurozone are all in to battle with the recession woes with a heavy push to defend energy companies and stock for winters.

Tighter supply in China and a fall in the metal’s output in Peru also favor the prices. “The premium of LME cash copper over the three-month contract rose to $77.50 a tonne on Monday, the highest since December 2021, signaling tightening supply of immediately available material on the LME warehouses,” said Reuters. The news also added that in Peru, the world's second-largest copper producer, copper output in July fell 6.6% year-over-year to 195,234 tonnes after two of the country's largest mines underperformed.

Technical analysis

A clear downside break of 3.3780 becomes necessary for the copper future bears at the COMEX.