Demand for higher risk assets could trigger a rise in December High Grade Copper prices today. Although the U.S. futures markets are closed, electronic trading suggests the market is poised for a strong rally. The U.S. Dollar may be trading higher, but this is not having an effect on copper prices. Traders seem to be focused more on the stronger economic data from China than on the possibility the Fed will begin tapering its monetary stimulus later in the month.
Early in the session, copper prices firmed after China’s National Bureau of Statistics and China Federation of Logistics said their Purchasing Managers’ Index for manufacturing to 51 last month. This was its highest level since April 2012. Last month, HSBC Holdings Plc and Markit Economics PMI for China rose to 50.1 versus a July reading of 47.7. Today’s reading suggests the economy has turned the corner and is now growing. This could lead to increased copper demand.
The U.S. Dollar rose as speculative investors increased bets the Fed would begin reducing monetary stimulus after its September 17 – 18 monetary policy meeting. The up move also indicates investors believe Friday’s U.S. Non-Farm Payrolls report will be strong enough to warrant such a change.
The news that the U.S. has most likely delayed its attack on Syria may have added some confusion to the markets, but the focused seemed to be on the data from China anyway. This may become a factor later in the week or early next week.
Technically, the main trend turned down on the daily chart last week when the market took out the last swing bottom at 3.2925. The sharp break came to a halt however on the first test of a major 50% price level at 3.2243. Based on the new short-term range of 3.3950 to 3.2230, a rally today could trigger the start of a retracement into 3.3090 to 3.3293.
The key to rally today will be how the market reacts following its first test of 3.2935 to 3.2950. A sustained move through these two Gann angles could trigger a sharp breakout into the aforementioned retracement zone.
Today is a holiday in the U.S. so the trading session will be short. Volume is expected to be down also so do not treat it as a normal trading day.