Copper Price Outlook: Pullback On The Cards As US-China Trade Tensions Escalate

The price of copper has long been utilized as a gauge of world economic growth, with rising prices tending to suggest an increase in global manufacturing and construction.

However, the ductile metal’s rally back above the yearly open seems to have stalled just short of the 2019 high, despite recent manufacturing PMI data out of the United States (50.9), Canada (52.9), China (52.8), the Euro-zone (51.8) and Australia (53.5) all rising into expansionary territory.

As noted in previous reports, supply-and-demand dynamics may be to blame for copper’s relatively subdued performance as a notable increase in Peruvian production seemed to successfully counterbalance a modest decline in Chilean copper production.

Copper Price Outlook: Pullback on the Cards as US-China Trade Tensions Escalate

Source - Bloomberg

Furthermore, geopolitical tensions between the US and China, combined with a ‘second wave’ of coronavirus infections in multiple locations could be weighing on the global-growth proxy, as the number of confirmed cases globally soars above 18.5 million.

Given President Donald Trump’s statements that he doesn’t “feel the same way about the deal”, market participants may cut back their exposure to trade-sensitive assets ahead of ‘phase-one’ trade deal discussions on August 15, as the risk of a break-down in relations becomes more likely.

With that in mind, copper prices may continue to stall ahead of the 2019 year high as investors focus on developments between the world’s two largest economies.

Copper (XCU/USD) Daily Chart - Price Looking To Consolidate At Key Support

(Click on image to enlarge)

Copper daily chart created using TradingView

From a technical perspective, the outlook for copper prices remains skewed to the upside as price continues to respect the Ascending Channel that has guided price higher for the better part of four months.

However, a short-term pullback looks to be on the cards as the RSI slides below 60 and the ‘faster’ MACD line crosses below its ‘slower’ counterpart.

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