Copper prices on the London market stabilized on Tuesday after earlier declining to their lowest levels in three weeks, under pressure from the strength of the US dollar and concerns about a slowdown in the global economy.

As of 07:31 GMT, the price of three-month copper contracts on the London Metal Exchange held steady at $12,996 per metric ton, after earlier in the session recording its lowest level since April 13.

Trading remained limited as the Shanghai Futures Exchange was closed for the Labor Day holiday, with trading set to resume on Wednesday.

On the geopolitical front, the United States and Iran launched new attacks in the Gulf on Monday as part of their rivalry over control of the Strait of Hormuz through reciprocal naval blockades, increasing uncertainty in global markets.

Bitcoin (BTC) extended its gains, surpassing the $81,000 level during Tuesday’s trading, supported by strong inflows into spot exchange-traded funds (ETFs). Despite the positive price momentum, weak on-chain activity points to the fragility of this rally and the possibility of a near-term correction.

Strong institutional demand supports prices

Institutional demand started the week on a positive note, boosting the performance of the world’s largest cryptocurrency. Data from SoSoValue showed that US-listed spot Bitcoin ETFs recorded inflows of $532.21 million on Monday, marking the third consecutive day of positive inflows. If this trend continues, it could support further price gains.

Why does the rally appear fragile?

Data from Santiment indicates that overall activity on the Bitcoin network has declined to its lowest level in two years, despite the price returning above $80,000, levels not seen over the past three months.

Historically, such rallies that are not supported by increased on-chain activity tend to be unstable. One company analyst said: “There is simply less buying fuel supporting this move. If large players decide to take profits, there may not be enough new demand from users to absorb the selling and maintain elevated prices.”

In addition to this divergence, previous reports suggest that the current rally is primarily driven by demand for perpetual futures, while spot markets remain in contraction.

Traders are advised to exercise caution, as the current market structure reflects a more speculative nature rather than being based on strong fundamentals, a pattern similar to what occurred at the beginning of the 2022 bear market.

Price outlook: Key resistance ahead

Bitcoin is trading near the $80,900 level, maintaining a short-term upward trend as it remains above the 50-day and 100-day exponential moving averages, which range between $74,700 and $76,000, and is also trading above the 50% retracement level between the January high and February low at around $78,962.

Momentum indicators point to continued strength, with the MACD showing improvement in trend, while the Relative Strength Index (RSI) is approaching the 68 level, indicating that the market is nearing overbought territory. Meanwhile, the 200-day moving average at around $81,917 represents the first major resistance level.

On the upside, immediate resistance stands at $81,917, followed by $83,437 (61.8% Fibonacci retracement), then $84,410 as a stronger barrier.

On the downside, the $80,000 level represents initial psychological support, followed by $78,962, while deeper declines may extend toward $75,995, then the broader demand zone near $74,500.

Global oil prices fell on Tuesday, a day after the United States launched an operation aimed at reopening the Strait of Hormuz to shipping traffic, but exchanges of fire between the United States and Iran limited the pace of the decline.

Maersk said that the vessel “Alliance Fairfax,” a US-flagged car carrier, departed the Gulf through the strait accompanied by the US military.

Tim Waterer said in a note: “This shows that limited safe passage is possible under current conditions and helps reduce some of the worst fears about supply disruptions.”

He added: “However, this remains an exceptional event rather than a full reopening of the passage.”

Brent crude futures fell by $1.38, or 1.2%, to $113.06 per barrel, after closing up 5.8% on Monday. US West Texas Intermediate crude declined by $2.21, or 2.1%, to $104.26 per barrel, following gains of 4.4% in the previous session.

Military escalation pressures the market

Iran launched attacks on Monday in the Gulf to counter US attempts to control the strait, which connects the Gulf to global markets and typically carries about 20% of the world’s daily oil and gas supplies.

Several commercial vessels in the Gulf reported explosions or fires on Monday, and an oil port in the United Arab Emirates—hosting a major US military base—was hit by Iranian missiles, causing fires to break out.

US forces, for their part, announced that they destroyed six small Iranian boats, in addition to cruise missiles and drones.

Priyanka Sachdeva said: “Prices continue to trade within a highly volatile range, driven primarily by ongoing tensions in the Strait of Hormuz.”

She added: “Despite the slight decline in prices during recent sessions, this does not reflect a real improvement in fundamentals, but rather represents a temporary relief following the launch of the US ‘Project Freedom’ operation.”

The US dollar stabilized during Tuesday’s trading, as markets await developments in the war related to Iran, while the Japanese yen maintained its stability in quiet trading, following sharp gains last week amid suspicions of intervention from Tokyo to support it.

The ceasefire in the Middle East has come under renewed doubt after the United States and Iran launched new attacks as part of the conflict over control of the Strait of Hormuz, amid conflicting reports about ship movements through the strait in recent days.

The dollar index, which measures the performance of the US currency against a basket of six major currencies, held steady at 98.44 points, after rising by 0.3% on Monday. The euro stood at $1.1691, while the British pound recorded $1.3538.

Jane Foley said: “I think the market is well aware that the flow of news can change very quickly, and that things could move in either direction, which is why we are seeing a state of anticipation and caution.”

Meanwhile, the Australian dollar edged lower after the central bank raised interest rates, as expected, for the third consecutive meeting in an attempt to curb inflation, recording $0.7154 in its latest trading, down by 0.18% during the day.

The central bank sharply raised its inflation forecasts, while lowering its projections for economic growth and employment, due to the global energy price shock.

Matt Simpson said that the Reserve Bank of Australia adopted a hawkish stance, but is still leaving the door open for the possibility of one or two additional interest rate hikes by December.

Traders closely monitor the yen

The yen recorded 157.19 against the dollar, near its strongest levels in two months, after a wave of sharp gains since Thursday, when sources reported that Japanese authorities intervened in the currency market to halt a sharp decline in the currency.

Data last week showed that Tokyo spent about $35 billion to support the yen, although analysts believe that this move is unlikely to provide long-term support for the currency.

The yen has struggled for years, affected by extremely low interest rates in Japan and the widening gap with higher-yielding advanced economies, in addition to growing fiscal concerns, while the energy shock resulting from the war has increased pressure on it.

Deepali Bhargava said that the suspected intervention only reset the dollar/yen trading range in the short term, without changing the structural pressures driving the selling of the yen.

A temporary rise in the yen on Monday sparked speculation of new intervention from Japan, especially after official warnings last week during the “Golden Week” holiday.

Charu Chanana said that markets are aware of the political sensitivity of the 160 level against the dollar, meaning that limited moves in thin trading could lead to large short-covering operations.

She added: “In the near term, the dollar/yen pair may remain volatile within a broader range between 155 and 160, with the possibility of authorities intervening to prevent a clear break of the 160 level rather than seeking to permanently reverse the yen’s direction.”

The fate of the yen is also linked to oil prices and the speed of the end of the war in the Middle East.

Vasu Menon said: “A lot depends on oil prices, and if they rise or remain at elevated levels, the yen could come under pressure again.”