Copper prices slide as volatility rises ahead of Chinese new year

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Copper prices slide

Highlights

On February 2, copper fell by around 2.4%, continuing a broader correction in the base metals market after recent peaks.
Lower prices are encouraging some producers to rebuild inventories, but demand signals remain weak and short-lived.
Copper may potentially recover part of its losses, though this would require macroeconomic stabilization and a seasonal shift.
Ahead of the Chinese New Year, low liquidity is likely to amplify volatility rather than support a sustained trend reversal.

From a technical perspective, copper’s price action has shifted from a momentum-driven rally to a broader corrective phase. In late January, prices were trading near multi-year highs of $14,530 per tonne, supported by supply concerns and speculative interest, particularly from Chinese markets. During the current selloff, copper has broken through several short-term support levels without sustained buying interest, indicating more than routine profit-taking.

Copper CFD daily chart. Prices are per pound. Source: TradingView.

The strengthening US dollar, supported by hawkish expectations regarding Federal Reserve policy, has further reduced demand for dollar-denominated commodities such as copper. In addition, exchanges including CME and MCX have raised margin requirements, forcing leveraged traders to reduce exposure and intensifying selling pressure.

Market dynamics and sentiment shift

The selloff that began late last week reflects a shift in market sentiment following a parabolic rally. Heavy speculative positioning, crowded long trades, and increased short-term leverage left copper vulnerable to rapid mean reversion once risk appetite deteriorated.

While recent data point to a modest pickup in demand in China following the decline in futures prices, this demand remains insufficient to support a return to recent highs. Seasonal slowing ahead of the Chinese New Year further limits near-term upside potential.

Looking ahead, the short-term outlook for copper remains unstable and highly volatile. In a bearish scenario, continued deleveraging and weakening demand could push prices toward lower support levels, increasing downside risks.

If copper fails to reclaim the $13,500 level, downside pressure may persist, making a test of the $12,700 area increasingly likely amid elevated volatility and short-lived rebounds. Conversely, if prices hold above $13,000, copper could enter a sideways consolidation range between $13,000 and $13,600. This would reflect cooling momentum rather than a trend reversal, with choppy price action dominating.

“Current weakness in copper prices represents a technical correction after an extended rally rather than a collapse in demand. If macroeconomic data stabilize later this quarter, copper should recover part of its losses,” said analyst Viktoras Karapetjanc.

However, a full bullish trend resumption this week appears less likely. In that scenario, a sustained move above $14,000 would open the path to new highs, but this would require a clear improvement in macroeconomic sentiment and demand signals from China.

As we wrote, Platinum price rebounds near $2,100 after sharp technical pullback

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