Comex High Grade Copper Futures (HG) Technical Analysis – August 26, 2016 Forecast

December Comex High Grade Copper futures had very little reaction to Fed Chair Janet Yellen’s speech earlier today. Yellen essentially said the case for a U.S. interest rate hike has strengthened in recent months, leaving the door open for a possible interest rate hike as early as next month.

Traders had mixed opinions about the message of her speech. The initial reaction by the U.S. Dollar, for example, leaned towards the hawkish side, but then as she continued to speak, sentiment shifted to the dovish side with many traders saying that she offered nothing new and no clarity as to the timing of the next Fed rate hike.

Although the U.S. Dollar was under pressure immediately after Yellen’s speech, this had very minimal effect on the dollar-denominated copper market. Copper traders instead maintained their focus on the bearish supply and demand situation.

Copper prices were pressured all week by the news that China had ramped up exports. The export number, with the slowing import numbers demonstrated that China might not be able to take too much supply. Essentially, supply-growth is stronger than demand-growth.

With this news, investors are even questioning the strength of China’s economy and is impact on future demand for copper. The charts may be oversold according to some technical indicators, but when combined with the bearish fundamentals, the market appears to be at a “make or break” point.

Technically, the main trend is down according to the daily swing chart. The market is in no position to turn the main trend to up, but it is nearing a timing point that could create a closing price reversal bottom. The timing for the reversal bottom is August 29 to August 31.

The main range is $2.0315 to $2.2860. Its retracement zone is $2.1290 to $2.1590. Trading below this zone is also helping to give copper a downside bias.

The current set up indicates that an upside bias could develop today on a sustained move over $2.1005. If enough upside momentum is generated, the move could continue into $2.1290 to $2.1400.

A sustained move under $2.1005 will indicate the presence of sellers. This could create enough downside momentum to challenge yesterday’s low at $2.0815. This is a potential trigger point for a break into the next major uptrending angle at $2.0660.

Watch the price action and read the order flow at $2.1005 the rest of the session. Trader reaction to this angle will determine the direction of the market into the close.