Copper dipped on Monday as the euro fell versus the dollar and investor caution set in after a rally on Friday on a U.S. jobs report and hope of a resolution to Europe's debt crisis, but a pledge by top metals consumer China to support growth limited losses.
A seasonally slow period for industrial demand due to summer holidays in the northern hemisphere is keeping copper volumes in check and prices rangebound between $7,200 and $7,800 per tonne, where they have been stuck since late May.
Prices may be jolted out of this range if China's economy, as analysts expect, picks up late in the third quarter or early in the fourth quarter and if there is no further marked deterioration the euro zone's finances.
London Metal Exchange (LME) three-month copper was $7,410 per tonne in official rings, from the close of $7,445 on Friday when it rose 1.6 percent, its biggest one-day gain since July 13, after a better than expected U.S. jobs report.
European shares retreated from four-month highs and the euro slipped from a one-month peak, with investors reluctant to extend the recent gains without more clarity on the next steps in Europe's three-year long debt crisis.
European Central Bank President Mario Draghi said last week the bank would act only in cooperation with the euro zone bailout funds, and would require countries to ask for help first.
"After a massive move upwards it's not unrealistic to see something of a correction and the market is again having another look at what is going on fundamentally, and it's not as positive as what the market thought last week," said Commerzbank analyst Eugen Weinberg.
"Longer term we see a bottoming out process, which is likely to soon be over, and stabilisation of the market. We're likely to see falling (metals) inventories, mine closures in some metals and a pick up in Chinese (metals) buying."
China's central bank pledged on Sunday to intensify fine-tuning of monetary policy in the second half of this year and to improve credit policy to bolster the real economy, echoing earlier government commitments amid an economic slowdown.
Chinese industrial production for July, alongside retail sales and inflation data, is due on Thursday. Those figures will be important for the base metals market because China is the world's top consumer of most industrial metals, accounting for 40 percent of refined copper demand last year.
"With the Q2 2012 earnings reporting season slowly fading out, the main market movers for this and next week are likely to be macro data, most importantly the industrial production data in Europe and China," Credit Suisse said in a note.
Investors will also look out for China's August Purchasing Manufacturers Index, which will be released at the beginning of next month.
"If the August print is lower, that would be one thing. If the number is below 50 (indicating a contraction), we are likely to see copper prices under renewed pressure," RBC Capital said in a note.
In other metals, tin was $17,775 in rings from $17,900 at the close on Friday, z inc was $1,832 f rom $1,840, aluminium was $1,862 from $1,860 and nickel was $15,525 from $15,625. Lead, untraded in rings, was bid at $1,883 from $1,895.