Comex Copper Futures Analysis – June 14, 2013

July Copper prices are trading flat-to-higher this morning following a volatile session on Thursday. Aggressive speculators appear to be taking a break today as they assess the supply situation in Indonesia and a series of economic reports from the U.S.

This morning the U.S. Labor Department reported a 0.5 percent rise in the Producer Price Index. This was the first gain in three months. In addition, the report beat preliminary estimates of a 0.1 percent rise. Later today, industrial production will be reported. Analysts are looking for a 0.2 percent rise in May. The Thompson Reuters/University of Michigan preliminary report retreated to 82.7 in June after reaching a six year high in May. Traders were looking for 84.5.

Like the equity markets and some other commodity markets, July Copper traders are waiting for the latest Federal Reserve policy statement on June 19. This statement is likely to set the tone of the market for several months because the Fed is going to reveal whether it is going to begin tapering its aggressive bond-buying stimulus program.

The next move by the central bank is going to move the U.S. Dollar and since copper futures are priced in dollars, their decision may affect foreign demand. In May, the first talk of curtailing stimulus drove interest rates higher and consequently demand for the U.S. Dollar. Lately, the dollar has weakened on the notion that the next Fed move would actually devalue the dollar. This creates a potentially volatile situation.

Technically, the market is at rest inside of a retracement zone at 3.2303 to 3.1859. If a support base builds inside this zone, then look for an acceleration to the upside once traders can sustain the move over the 50% level at 3.2303. Over the previous three sessions, the market straddled a Fibonacci level at 3.1859. Today it looks like the market is trying to establish support at this level.

A long-term uptrending Gann angle from the 3.0425 bottom is also trying to become support at 3.1975 today. Holding above this angle could help drive the market to the downtrending resistance angle at 3.2580. A longer-term look at the market suggests that breaking out above the downtrending angle will be the key to the next rally. This angle has provided both strength and direction since the market topped at 3.3980 on June 5.

With the supply situation in Indonesia underpinning the market, bullish speculators are not waiting for a catalyst to drive the market higher. This is likely to occur on June 19 following the release of the Fed’s next statement.