US copper futures rebounded from 2-1/2-week lows overnight to trade slightly higher, but the upside looked cloudy as a strong dollar and lingering concerns of slowing Chinese demand continued to weigh on sentiment, analysts said.
"It seems metals have been unnerved by the recent Chinese copper trade data and inflation readings, since if the Chinese markets show signs of slowing, many of the remaining bullish underpinnings in several key metal markets could be whittled down even further," said Edward Meir, metals analyst with Man Financial.
Copper for July delivery was up 1.25 cents to $3.2995 a lb by 10:23 am EDT (1423 GMT) on the New York Mercantile Exchange's COMEX division, recovering from an overnight low at $3.21, its cheapest level since May 25. After breaking below Friday's low at $3.2440, traders now looked for support in July copper at around the May lows at $3.1650 to $3.17. Resistance continued to be eyed at $3.50, they said.
Estimated copper futures volumes reached 4,699 lots by 9 am increasing speculation that rising inflation in China would force the country to boost interest rates prompted red metal investors to liquidate holdings amid fears rising rates would slow the country's economic expansion and limit investment in industrial metals, like copper.
On Tuesday, the Chinese government reported annual consumer price inflation of 3.4 percent for May, its highest in more than two years. Chinese demand worries were inflated after trade data showed imports of copper, including semi-finished products, fell 28 percent in May.
The dollar continued its climb against the euro on Wednesday, after data showed May US retail sales growth was the largest since January 2006, suggesting the economy was recovering strongly after a slowdown in the first quarter. Xstrata Plc's CCR copper refinery in Montreal will continue to operate at a reduced rate after 430 workers went on strike, the company said on Tuesday.