December High Grade Copper futures are called higher today. The weaker dollar is helping to make dollar-denominated copper a more attractive investment for foreign traders, leading to the overnight follow-through rally. Calls for stronger economic news from China later in the week are also helping to boost demand.
Friday’s weaker-than-expected U.S. Non-Farm Payrolls data helped weaken the dollar by lessening the prospects the Fed will reduce its monthly monetary stimulus by as much as $20 billion as previously expected. Currently, the Fed is buying up to $85 billion in government bonds per month. Traders are now pricing in a $10 billion cut.
The main trend is down on the daily chart. The main trend will turn up when the last top at 3.3950 is taken out. Although greater demand from China could send the market soaring later in the week, it shouldn’t be enough to offset the prospects of Fed tapering by the end of the month.
Key support has formed at 3.2230 and 3.2200. These lows were created at the major 50% price level at 3.2243. A break though this level could trigger an eventual decline to 3.1840.
Based on the new short-term range of 3.3950 to 3.2200, the new upside target is a retracement zone at 3.3076 to 3.3282. Since the main trend is down, look for selling pressure to re-emerge following the first test of this zone.