Copper prices have fallen for two consecutive weeks but remain above the critical $6.659 zone. Profit-taking after the rapid previous rally, coupled with a rebounding dollar raising purchasing costs for non-dollar buyers, has prompted a temporary withdrawal of funds from industrial metals. The current correction has not yet completely disrupted the medium-term structure.
Inventories Plunge 19%, Providing Support from the Supply Side
Inventory data serves as the most important fundamental support for bulls, with a recent sharp drop of about 19%. Declining inventories indicate tightening spot supply; if manufacturing demand remains stable, buyers may return to the market to replenish stocks. Expectations of a supply gap have therefore limited the downside for copper prices.
A Strong Dollar Weighs on Industrial Metals Performance
Pressure mainly stems from a strong dollar and interest rate expectations. Continued dollar appreciation would weigh on commodity valuations and could also dampen global risk appetite. If macroeconomic data reinforces expectations of higher interest rates, copper prices, even under tight supply conditions, might first undergo an adjustment driven by fund flows.
Support vs. Supply Gap: Who Will Prevail First?
The $6.659 level is the short-term dividing line between bulls and bears. Holding above this level and resuming an uptrend with volume would signal that falling inventories and the supply gap are beginning to dominate. An effective break below, however, would indicate stronger pressure from the dollar and risk aversion, potentially pushing prices toward the next support level to find footing. Retail investors need to monitor both inventory changes and the dollar's direction simultaneously, rather than chasing rallies based on a single data point.
