Daily September High Grade Copper

Comex High Grade Copper Futures Analysis – July 30, 2013

September High Grade Copper prices fell on Tuesday in anticipation of weak economic data from China. Traders also priced in the possibility of a stronger dollar as the Fed began its two-day policy meeting.

Bearish traders sold copper futures ahead of a report which is expected to show weak manufacturing data from the world’s second largest consumer of copper. Investors are looking for China’s manufacturing sector to show the sector contracted for the first time in 10 months.

Traders also pressured copper prices in anticipation of a Fed statement calling for the start of a reduction of its huge monetary stimulus program. Currently, the central bank is buying $85 billion in government bonds and mortgages per month. Traders are beginning to price in the possibility of a $20 billion cut starting in September.

Daily September High Grade Copper
Daily September High Grade Copper

A reduction in stimulus should underpin U.S. interest rates, making the dollar a more attractive investment. Since copper is dollar-denominated, foreign demand is likely to fall. Coupled with a drop in demand from China, prices may drop even further over the near-term.

Technically, the market closed on an uptrending Gann angle at 3.0455, putting it in a position to take out the July 9 bottom at 3.0250. A move through this level could encourage even more selling and an eventual test of the contract low at 2.9855.

Holding 3.0455 could mean that sellers are booking profits ahead of the Chinese manufacturing data. This could also mean that bearish news is already priced in, triggering the start of a short-term retracement rally. Once this rally helps relieve the current oversold conditions, short-sellers are likely to regain control. 

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.

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