Daily September High Grade Copper

Comex High Grade Copper Futures Analysis – July 31, 2013

After closing on its low on Tuesday, September High Grade Copper futures were poised to open lower and challenge the contract low at 2.9855, but sellers failed to show up ahead of an early U.S. Gross Domestic Product report, the latest Fed statement and the release of China Manufacturing PMI later in the evening. These events were enough to encourage short-sellers to bail out of their positions and square their accounts.

Early Wednesday, it was reported that the U.S. recorded better-than-expected GDP data. Although the dollar rose, it was not enough to trigger another round of selling in the copper market. Later in the session, the Fed surprised traders by offering nothing new in its monetary policy statement. Traders had been looking for some clarity from the central bank regarding its plan to begin tapering its massive monetary stimulus, but all they got was the reiteration of the previous statement.

Daily September High Grade Copper
Daily September High Grade Copper

In other words, no tapering would take place until the economy improved enough to warrant such a change. This confused a number of traders who had been looking for clues the Fed was getting ready as early as September to begin reducing stimulus by as much as $20 billion per month. This news triggered a volatile down move in the U.S. Dollar while fueling a strong surge in September Copper.

The strong close put copper in a position to rally further, but this next move was going to be determined by China’s official manufacturing data. Traders are looking for this index to post a reading of 49.8 which would be confirmation of a weakening economy. If the number comes out weaker than expected, copper prices could plunge again, but this would then cause a battle between those who believe copper will rise because of the weaker dollar and those who think Chinese demand is controlling the price action.

A stronger-than-expected figure could send copper prices skyrocketing especially when combined with the bullish news from the Fed. Any rally could be short-lived however, since Friday’s U.S. Non-Farm Payrolls report could put pressure on prices once again if it is strong enough to make the Fed begin tapering.

Technically, the main trend is still up on the daily chart since investors were able to successfully defend the last swing bottom at 3.0250. A move through this price would’ve changed the main trend to down.

Currently, the market is finding support on a slow-moving, uptrending Gann angle at 3.0480. This angle is moving up at a rate of .0025 per day and comes in at 3.0505 on Thursday. From the 3.2340 top, downtrending resistance dropped in at 3.1340 on Wednesday. This angle moving down at a rate of .005 per day comes in at 3.1140 on Thursday. A move through this angle will be a sign of strength.

Another potential upside target is the retracement zone at 3.1350 to 3.175. Buyers are going to have to take out this area with conviction to signal it is ready to resume the uptrend through 3.2340. 

Published by

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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