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Copper price began the new week in green as bulls strive to break the resistance around $4.4000 per pound. At the time of writing, COMEX copper futures were at $4.4275, having been range-bound for close to three weeks. 

Optimism over China’s fresh stimulus package is a key driver for the red metal. More specifically, investors are eyeing the five-day meeting by the country’s legislators and subsequent announcement on Friday on any fiscal stimulus. 

Besides, a pullback in the US dollar has boosted copper prices ahead of the tightly contested US presidential elections. Depending on the winner, shifts in policies and transnational relations will be felt across financial markets.  

China’s stimulus 

In late September, China’s central bank announced a couple of aggressive stimulus measures that saw copper price rally to a four-month high. The stimulus, which is the largest since the COVID-19 pandemic included lowering the reserve requirement ratio (RRR), easing households’ burden on mortgage repayments, and injecting more money into the company. Authorities of Shanghai, Shenzhen, Beijing, and Guangzhou then followed it up with related measures aimed at bolstering the local real estate markets.

However, subsequent briefings by the country’s housing minister and the chairman of the National Development and Reform Commission (NDRC) were rather underwhelming for investors. 

The absence of exact figures contributed to the fading of the stimulus cheer and subsequent decline in copper price on the COMEX market past the crucial support-turn-resistance zone of $4.4000 per pound.    

Notably, the optimism is back up in the new week as investors eye the 5-day meeting held by the standing committee of the National People’s Congress from Monday. Details of the held discussions are expected to be released on Friday and will include any fiscal stimulus. 

Analysts and investors alike are hopeful that the legislators will endorse additional stimulus measures with the aim of boosting the world’s second largest economy. Based on the red metal’s vast uses in construction, industrial, and manufacturing sectors, a larger fiscal stimulus package by China, which is the leading consumer of industrial metals, will boost copper demand outlook and prices by extension. 

Besides, as a barometer of global economic health, hints at the steady recovery of the Chinese economy will further bolster copper prices. The government has an economic growth target of 5% for the entire year of 2024. In the year’s first three quarters, the country’s economy grew at an annualized rate of 4.8%. In comparison, it recorded a growth rate of 5% in the year’s first half. 

In the case of the US, a key indicator on investors’ radar is the two-day Fed meeting slated to end on 7th November. While the markets have already priced in a rate cut of 25 basis points, the focus will be on the central bank’s tone. Notably, the event comes after a better-than-expected September jobs report followed that an October report that came in way below the average forecast. 

US dollar on edge ahead of the election

The US dollar pullback recorded at the start of the week is yet another reason for the observed gains in copper price. Similar to other dollar-priced assets, such a decline makes copper less expensive for investors with foreign currencies. 

Notably, the greenback has recorded gains over the past five consecutive weeks; an aspect that has weighed on copper price. Last week, the dollar index, which measures the value of the greenback against a basket of six currencies, hit a three-month high at $104.62 before pulling back to $103.66 as at the time of writing.  

As it stands, investors are hesitant to place large bets ahead of the tightly contested US presidential elections. The expected surge in volatility throughout the week is expected to particularly affect the stock and currency markets. 

At the same time, Trump has threatened to increase tariffs for China’s exports to the US by 60%. As such, his win may prompt the Chinese government to announce a higher fiscal stimulus package especially for the domestic market.   

Copper price analysis

(Click on image to enlarge)

Turning to the daily chart, we see that the price of copper has remained in a tight range in the past few weeks. It has remained between the 23.6% and 38.2% Fibonacci Retracement levels. 

Copper has moved above the 50-day and 100-day Exponential Moving Averages (EMA), meaning that bulls are in control for now. It has also formed an inverse head and shoulders pattern whose neckline is at $4.70.

Therefore, copper will likely remain in this range in the next few days. More gains will see it rise to the next resistance level at $4.70.

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