December High Grade Copper futures traded lower on Thursday, taking out the previous minor bottom at 3.2230. Although there is a growing bias to the downside, investors seemed reluctant to sell weakness ahead of today’s U.S. Non-Farm Payrolls report. The subsequent rally was probably short-covering.
Investors are looking for today’s jobs report to show that the U.S. economy added 180,000 new jobs. The unemployment rate is expected to come in unchanged at 7.4%. The number of jobs added should be enough for the Fed to begin tapering by the end of the month. In addition, some traders are pricing in an initial cut of $20 billion of the $85 billion currently being used.
A number below 180,000 will be of some concern but the real worries will start if the number of jobs added is below 160,000. It may not mean the Fed will scrap its plans to taper, but it may mean the amount of the reduction will have to be adjusted lower.
Technically, the key resistance angle is at 3.2350. A sustained move above this angle could trigger an eventual rally into a retracement zone at 3.3075 to 3.3282. This rally will only take place if the jobs number misses the guess badly to the downside.
A strong number will mean another test of the 50% level at 3.2243. In addition, the selling pressure is likely to take out the two lows at 3.2230 and 3.2200. A sustained move under the 50% level should trigger a further decline into the Fibonacci level at 3.1840.
Traders should brace for a volatile trading session.