September High Grade Copper futures fell sharply on Friday following the release of the U.S. Non-Farm Payrolls report. The June jobs data showed the economy added 195,000 new jobs. This was better than the pre-report guesses of 165,000. The unemployment rate remained unchanged at 7.6%.
The strong jobs report led to speculation the Fed was now closer to winding down its aggressive monthly bond-buying stimulus program. This helped drive up interest rates, making the dollar a more attractive investment. Since copper is priced in dollars, demand may fall since it may be too expensive to foreign buyers.
Another concern for investors is the slowing Chinese economy. The recent performance of the economy suggests demand from the world’s second largest copper buyer may decline. This would put additional pressure on copper prices.
Technically, the main trend is down. The new main top is 3.1790. A trade through this price will turn the main trend to up. There may not be an acceleration to the upside however because of retracement zone resistance at 3.1990 to 3.2494.
On the downside, the market found support on an uptrending Gann angle at 3.0555. A break through this level could trigger a further decline to another Gann angle at 3.0205 then eventually the main bottom at 2.9855.
The fundamentals seem to support further downside action while the technical chart pattern suggests selling short-term retracements until the main trend turns back up. It looks as if rising interest rates are here to stay likely underpinning the U.S. Dollar. This should keep the pressure on copper prices. Traders should continue to follow the developments in China to see if the economy is still weakening.