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Copper prices touched a near six-month low on Tuesday as speculators boosted bearish positions amid worries of recession and weak demand in top metals consumer China.
Three month copper on the London Metal Exchange (LME) CMCU3 gave up 1.1% to $8,041 a tonne by 0940 GMT, after hitting its weakest level since Nov. 29.
“The short-term outlook has deteriorated with recession risks in Europe and the U.S., and a Chinese recovery that has not been commodity intensive,” said Ole Hansen, head of commodity strategy at Saxo Bank, Copenhagen.
“We’re trading well below the 200-day moving average and we’ve struggled to regain that level, which is an invitation for additional short-selling to hit the market as we saw today.”
The 200-day moving average, currently at $8,370 a tonne in LME copper, is a key indicator used by traders.
If LME copper fails to move above that level, it is likely to move down to the next support area around $7,850, Hansen added.
The most-traded July copper contract on the Shanghai Futures Exchange SCFcv1 declined 1.4% to 64,220 yuan ($9,290.95) a tonne.
Also pressuring metals was a firm dollar, which touched a six-month high against the yen, as expectations grew that U.S. interest rates would remain higher for longer, while the debt-ceiling impasse kept risk sentiment fragile.
A strong dollar index =USD makes commodities priced in the U.S. currency more expensive for buyers using other currencies.
LME aluminium CMAL3 eased 1.7% to $2,226 a tonne after more than 20,000 tonnes of metal arrived in LME warehouses in Gwangyang, South Korea.