Comex High Grade Copper Futures (HG) Technical Analysis – January 5, 2017 Forecast

March Comex High Grade Copper futures are trading higher early Thursday as buyers continue to come in after yesterday’s strong surge. Prices rose on Wednesday as the U.S. Dollar retreated from its 14-year high reached on Tuesday and on Chinese plans to add 2100 km of track to its railway network this year.

The dollar edged lower against a basket of currencies, making copper cheaper to foreign buyers. There was also evidence that commodity funds were taking new long positions.

On Wednesday, the market received an unexpected boost after Beijing announced plans to spend 800 billion yuan ($115.1 billion) to build extra track and electrify 4,000 km of railroad. This would mean higher demand for copper wiring.

Traders all seem to agree that in order to sustain a rally in copper, there must be increased demand from China.

Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been building to the upside since the formation of a closing price reversal bottom at $2.4480 on December 27.

A trade through $2.7130 will turn the main trend to up while a move through $2.4480 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The main range is $2.0970 to $2.7530. Its retracement zone at $2.4250 to $2.3475 is the primary downside target.

The short-term range is $2.7530 to $2.4480. Its retracement zone at $2.6005 to $2.6365 is the primary upside target. Since the main trend is down, we could see sellers show up on the first test of this zone. Bearish traders are going to try to form a secondary higher top. Bullish traders are going to try to drive the market through this zone in an effort to make $2.4480 a new secondary higher bottom.

Forecast

Based on the current price at $2.5740 and the earlier price action, the direction of copper today is likely to be determined by trader reaction to the uptrending angle at $2.5680.

A sustained move over $2.5680 will indicate the presence of buyers. This could lead to a labored rally into $2.6005, $2.6230 and $2.6365.

The short-term Fibonacci level at $2.6365 is the trigger point for an acceleration to the upside with the next target angle coming in at $2.6880.

A sustained move under $2.5680 will signal the presence of sellers. The daily chart is open to the downside with the next target angle coming in at $2.5080.

Watch the price action and read the order flow at $2.5680 today. Trader reaction to this angle will tell us if the buying is getting stronger or if the sellers are retaking control. The direction of the U.S. Dollar should be a big influence on the direction of the copper market too.