Copper price took a breather after touching a fresh all-time high on MCX during the week and is on the way for first weekly loss in over five weeks, pressurised by a stronger dollar, weak loan data from top consumer China and worries that Beijing would cap commodity prices.
The reddish-brown metal ended the week with a loss of Rs 12.9 or 1.64 percent on the domestic bourse. The prices declined in three out of five trading sessions on the MCX.
Copper delivery for May slipped by Rs 6.35, or 0.81 percent, to close at Rs 773.25 per kg with a business turnover of 3,391 lots. The same for the June contract eased by Rs 5.90, or 0.75 percent to Rs 777.60 per kg with a volume of 888 lots.
The value of May and June’s contracts traded on Friday was Rs 5,090.05 crore and Rs 210.34 crore, respectively.
Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited, said, “Copper came down after the increased margin by China and closed in red after five-odd weeks, the dollar also firmed after US consumer prices rising at their fastest pace in nearly 12 years raising the concern of interest rate hike to subdue inflationary pressures. We also witnessed that LME has increased margins to trade which will curb fresh buying. Some additional correction cannot be ruled out next week, and buying on dips is advisable.”
The dollar firmed after data showed US consumer prices rising at their fastest pace in nearly 12 years, which fuelled concern that the US Federal Reserve would hike interest rates to subdue inflationary pressures. The dollar index ended with a gain of 0.07 percent during the week.
China will monitor changes in overseas and domestic markets and effectively cope with a fast increase in commodity prices, the state council said.
The growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in China, slowed to 11.7 percent in April from a year earlier and from 12.3 percent in March. TSF is seen as a key indicator for metal demand in China.
Chinese banks extended 1.47 trillion Yuan ($ 228.21 billion) in new yuan loans in April, down from 2.73 trillion Yuan in March and lagging analysts’ expectations of 1.6 trillion Yuan.
Prices initially moved higher as traders bet on demand prospects from metal-reliant renewable energy and electric vehicles (EV) sectors and as the global economy steadily recovers from the fallout of the COVID-19 pandemic.
The base metal price settled with a loss of 0.57 percent at $ 10,233 per tonne in London.
Technicals
Sriram Iyer, Senior Research Analyst at Reliance Securities, said, “Technically, LME Copper will continue its bullish momentum up to $ 10,500-$ 10,850 levels. Support is placed at $ 9900-$ 9700 levels.”
“Domestically, MCX Copper May could bounce back from 755-760 levels where it will continue its bullish momentum up to 782-800 levels in the coming week,” Iyer noted.
Outlook
Investors could continue to book some additional profit-taking as markets remain extremely overbought.
Moreover, LME has increased margins to trade which will curb fresh buying. So, some additional correction cannot be ruled out next week.
The only question for investors will be whether China will introduce measures to curb higher prices. If that happens, we could see more correction in the short to medium term, Iyer added.
Recommendation
“For the upcoming week, MCX Copper is likely to continue its bullish momentum towards a new all-time high. Traders can go for a buy-on-dips opportunity in MCX Copper from the downside support around Rs 768-767.20, keeping a stop loss at Rs 762 to chase the target at Rs 797,” said Purohit.
Reliance Securities advises its clients to buy May copper futures on dips near Rs 770 with a stop loss at Rs 763 and a target of Rs 785.
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