Copper prints three-day downtrend around $3.40 on China-inspired fears, firmer DXY

• Copper holds lower ground near intraday bottom, down for the third consecutive day.
• Clear break of weekly support line joins China’s covid woes, downbeat PMI to weigh on prices.
• DXY begins the key week on a firmer footing amid hawkish Fed bets.

Copper remains bearish for the third consecutive day as sellers approach the $3.4000 psychological magnet heading into Monday’s European session, near $3.4030 by the press time. In doing so, the red metal justifies the market’s risk-off mood, as well as the firmer US dollar, ahead of the key central bank meetings.

Macau’s lockdown of a casino resort and fears emanating from Russia gain major attention when it comes to the risk-negative catalysts. “Russia, which invaded Ukraine on Feb. 24, halted its role in the Black Sea deal on Saturday for an ‘indefinite term’ because it could say it could not ‘guarantee the safety of civilian ships’ traveling under the pact after an attack on its Black Sea fleet,” reported Reuters.

On the other hand, China’s official NBS Manufacturing PMI for October dropped to 49.2 versus 50.0 expected and 50.1 prior. Further, the Non-Manufacturing PMI also slumped to 48.7 compared to 51.9 market forecasts and 50.6 previous readings. “China’s factory activity unexpectedly fell in October, an official survey showed on Monday, weighed by softening global demand and strict COVID-19 restrictions, which hit production,” said Reuters following the data.

Alternatively, Reuters’ report suggests a drop in Chile’s copper output struggles to defend the metal buyers amid China’s covid woes. “Copper output in Chile, the world’s largest producer of the metal, fell 2.6% on a year-on-year basis to 439,277 tonnes in September, the country’s statistics agency, INE, said on Friday,” the news states.

Against this backdrop, the US 10-year Treasury yields seesaw near 4.00% after snapping the 10-week uptrend while the US equity future prints mild losses even after Dow Jones braces for the biggest monthly jump since 1976.

Looking forward, activity numbers from China and the US will join the Nonfarm Payrolls (NFP) to direct short-term copper traders. However, major attention will be given to the Fed’s language as DXY bears could jump if policymakers hint at slower rate hikes starting from December.

Technical analysis

A successful break of the one-week-old ascending trend line, now resistance around $3.4500, directs copper prices toward the monthly low near $3.30.