Copper rebounds over $3.90/lb on Chinese stimulus and a falling dollar

The price of copper is approaching the key $4 a pound resistant level, having benefited from Chinese officials promising more stimulus measures to support economic recovery, and the weakness in the U.S. dollar, despite the soft manufacturing and construction activity around the world which is adding pressure to copper demand growth.

Copper prices, Daily chart

Copper futures rose as high as $3,94 a pound this morning, posting over 2.5% weekly gains so far this week, and adding more than 10% after bottoming at $3.55 at the end of May amid weak economic readings from China.

Commodities traders are now awaiting more cues on stimulus measures from China, the world’s largest copper importer and refiner, which could increase the demand for copper after a three-year swamp.

The Chinese government has recently signaled that they will unlock more stimulus measures to support a slowing post-pandemic economic rebound, boost the struggling local property market, and increase the country's automobile and consumer electronics spending.

Falling dollar boosts copper:

The dollar-denominated copper prices are reacting positively to the recent weakness on the greenback, even after Wednesday’s fresh rate hike by 25bps to the target range of 5.25%-5.50% by the Federal Reserve as widely expected.

The broader action of the DXY-U.S. Dollar Index has been bearish lately, falling as low as the 100 mark, which has given some strength to copper and other dollar-denominated industrial and precious metals as the falling dollar makes them less expensive for buyers with foreign currency.

However, any significant gains on copper could be limited as Fed downplayed the prospect of a rate cut during 2023, pointing to continued pressure on copper from U.S. rates remaining at their highest level since 2001.