December High Grade Copper futures broke sharply on Wednesday as investors squared positions ahead of Friday’s U.S. Non-Farm Payrolls report. Copper is affected by this report because the Fed will use the jobs data to decide whether to begin tapering its monetary stimulus by the end of the month.
The price action this week suggests the Fed is set on reducing stimulus by at least $20 billion per month. Currently it is providing $85 billion per month in monetary stimulus. This should drive up interest rates, making the U.S. Dollar a more attractive investment. A stronger dollar usually means lower demand for the dollar-denominated copper market.
Fundamentally, investors will get the chance to react to a pair of key economic reports. The Weekly Jobless Claims report is expected to remain flat at 332,000. A lower number could break copper prices. Later in the morning, the U.S. will report its latest ISM Services PMI. A better number will also be bearish for copper prices.
Technically, the weak close has the market in a position to test a major retracement zone at 3.2243 to 3.1840. Taking out the last bottom at 3.2230 will reaffirm the downtrend.
The close also has the market on the weak side of a steep downtrending Gann angle at 3.3670. The nearest uptrending Gann angle support is at 3.0795.