Copper price braces for four-month downtrend amid recession woe

• Copper snaps five-day uptrend while retreating from three-week top.
• US Q2 GDP confirms “technical recession” but policymakers try to defend Fed hawks.
• Hopes for more stimulus from China, softer US dollar tests bears ahead of key US inflation data.

Copper price fail to cheer US dollar weakness as fears of economic slowdown escalate during early Friday in Europe. In doing so, the red metal prints the fourth straight monthly loss during the final days of July. It’s worth noting, however, that the softer US dollar and expectations of China’s stimulus recently challenges the bears.

That said, copper futures on COMEX drop 0.55% intraday to $3.47 by the press time while snapping a five-day uptrend, as well as retreating from the highest levels since July 08.

Elsewhere, the three-month copper on the London Metal Exchange (LME) drops 0.4% to $7,729 a tonne, marking a 6.5% monthly loss to flash the biggest slump since August 2015. Further, the most-traded September copper contract on the Shanghai Futures Exchange (SFE) rose 0.6% to 59,500 yuan ($8,818.34) a tonne.

US Dollar Index (DXY) drops to the fresh low since July 05, around 105.90 by the press time, as the Treasury yields remain pressured around a three-month bottom amid recession fears. The US 10-year Treasury yields fade early Asian session rebound while declining to the fresh low since April, near 2.67% at the latest.

While the yields drop, the US policymakers, including Fed’s Powell and Treasury Secretary Janet Yellen, tried to shrug off the “technical recession” after the US Q2 GDP dropped for the second consecutive time and teased the concept. The same probes the central bankers pushing for more rate hikes to tame inflation and hence drowning the US dollar.

Furthermore, talks between US President Joe Biden and his Chinese Counterpart Xi Jinping also went mostly okay and exerted downside pressure on the greenback’s safe-haven demand. Additionally keeping copper buyers hopeful is China’s readiness for more stimulus as Reuters reported, “China will strengthen efforts to stabilize foreign trade in the second half of the year, the commerce ministry said on Friday.”

Looking forward, the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, expected 0.5% MoM for July versus 0.3% prior, will be crucial for copper traders to watch for clear directions.