Comex High Grade Copper Futures (HG) Technical Analysis – February 8, 2016 Forecast

March Comex High Grade Copper futures broke sharply on Friday and finished lower. Sellers came in ahead of the start of the weeklong Chinese Lunar New Year on February 8 and after the release of the better-than-expected Average Hourly Earnings component of the U.S. Non-Farm Payrolls report. The news triggered a sharp rally by the U.S. Dollar.

If the dollar continues to rally today then look for further downside pressure. Volume may be down because the Chinese, who are major traders, will not be major participants this week.

Technically, the main trend is up according to the daily swing chart.

Based on Friday’s close at 2.1030, the first upside target is last week’s high at 2.1380. This is followed by the December 30 main top at 2.2485 and the major 50% level at 2.1525.

A sustained move over 2.1525 will put copper in an extremely strong position with the next possible target the major Fibonacci level at 2.2040.

The first major downside target is an uptrending angle at 2.0755. This angle has been guiding the market higher and providing support since the 1.9355 bottom on January 19. This angle is followed by a Fibonacci level at 2.0670.

The daily chart opens up to the downside under 2.0670 with the next two major targets a pair of 50% levels at 2.0420 and 2.0370.

The market closed in the middle of nowhere so we could see a volatile reaction in either direction. Another reason to expect this is the start of the Chinese Lunar New Year, which lasts a week. Without Chinese traders in the market, volume will be down, leaving the market vulnerable to excessive volatility.

Additionally, the market is likely to be driven by events in outside markets especially the U.S. Dollar since it is a dollar-denominated commodity. If the dollar rallies as expected then look for copper to weaken. If there is no follow-through move by the dollar after Friday’s strong finish then look for buyers to attempt to continue the copper rally.