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According to industry sources, China's inventories of mcx tips copper in warehouses monitored by the Shanghai Futures Exchange (SHFE), in bonded warehouses and inventories held by producers are well above 1 million tonnes, a record high, and it will take a few months for these stocks to be depleted. Putting further pressure on prices is mixed macro-economic data from US signaling faltering pace of recovery in the region.

Prices may further come under pressure amid choppiness in US Dollar. Dollar Index is trading slightly up in early trades today after a flat close yesterday. Dollar continues to seek support  from increase in safe haven demand amid uncertainty over global economic outlook and fears of debt crisis in Euro Zone. Also lending support is Fed’s stance of not embarking on further loosening of monetary policy. A stronger dollar makes dollar denominated metals costlier for buyers using other currencies, thus decreasing metals appeal for alternative investment.

Prices may also come under pressure amid choppiness in equities. Asian markets are trading tips mix tracking modest decline in US equities yesterday. In US, Dow Jones Industrial Average fell 82.79 points to end 0.63% lower at 13032.75, while S&P shed 5.64 points to end 0.41% higher at 1385.14.

The downside may however be capped amid hopes of easing monetary policy by China.

China said it will increase liquidity via open market operations and cutting banks' required reserves to steer the economy towards a soft landing, the official Xinhua news agency quoted an unnamed central bank official as saying.

On Supply front copper prices may seek support from expectation of tightness in physical markets. Rio Tinto reported worse-than-expected falls in copper production in the first quarter after it was hit by bad weather. Mined copper output fell 13% to 119,500 tonnes against analysts' forecasts of more than 140,000 tonnes. Also, GFMS in its annual Copper Survey released on Tuesday, projected a deficit of 97,000 tonnes this year due to supply constraints. It however reduced its average price forecast for copper to $8,475 a tonne this year, from an average of $8,811 in 2011.

However, according to CEO, of world top copperupdates producer Codelco, the company’s output is on track to hit a forecast 1.7 million tonnes this year, knocking down market talk the miner is short of red metal and buying on the spot market to meet contracts.

Meanwhile signaling tightness in spot market the premium for cash copper shot to as high as $114 per tonne on Tuesday against the benchmark three-month contract and stood at $85 yesterday. 

Overall prices may witness range bound movement as market awaits results of Spain bond auction. Also focus will be on macro-economic data releases from US due later in the day today. Positive data will lend support to the prices.