Comex High Grade Copper Futures (HG) Technical Analysis – June 13, 2016 Forecast

July Comex High Grade Copper futures closed lower on Friday and for the week. The price action was driven by a stronger U.S. Dollar, worries about weakening demand in China and soaring inventory levels in the London Metal Exchange.

Copper inventories in the London Metals Exchanged surged as high as 37% this week and kept the pressure on copper prices. The huge shift of copper stocks from the Shanghai inventories to the LME inventories occurred all week.

After increasing for six consecutive days, the copper inventories in LME declined on Friday by about 1.2% and reached 210,675 tons, the highest inventory level since February 2016. The 57,000 ton surge in the warehouse levels kept a lid on copper prices and led to last week’s test of a four-month low.

Weaker-than-expected Chinese economic data in April, which was followed by the weaker Caixin manufacturing PMI and services PMI, also kept the pressure on copper prices. The recent data showed a decline in China’s CPI and a decrease in copper imports. This indicated weakness in the country’s domestic copper demand which also weighed on prices.

Technically, the main trend is down according to the daily swing chart. The key this week will be whether the commodity funds will be willing to sell weakness through the four-month low, or will they try to trigger a short-covering rally that could create an opportunity to short at better prices.

Based on the close at 2.305, the nearest downside target is last week’s low at 2.0130, followed closely by the February 10 bottom at 2.0075. This is a possible trigger point for a steep sell-off into the January 15 main bottom at 1.9580.

The nearest upside target is a steep downtrending angle at 2.0450. This angle stopped a rally twice last week so look for a technical bounce on the first test. Taking it out could trigger a strong short-covering rally with the next target angle coming in at 2.0950.