Comex High Grade Copper Futures (HG) Technical Analysis – November 13, 2015 Forecast

December Comex High Grade Copper futures traded down to its weakest level in more than six years earlier in the session before rebounding to nearly unchanged. Sellers are being driven by a stronger U.S. Dollar, weak Chinese economic data and concern about oversupply.

Copper has been under pressure since the Fed hinted at a possible December rate hike in its monetary policy statement in late October. Last week’s stronger-than-expected U.S. Non-Farm Payrolls report also led traders to increase the odds of an early Fed rate hike to 70%. Both moves triggered a surge in the dollar which fueled the current round of selling pressure on the dollar-denominated copper market.  A firmer dollar dampens demand for metals priced in the U.S. currency, making them more expensive for foreign buyers.

Recent weak Chinese economic data including today’s credit data also contributed to the weakness. This may have led to heavy selling from Chinese funds. Today’s data showed that credit activity in China’s financial system dropped to its lowest level in 15 months in October, highlighting the challenges the country faces as it seeks investment to reinvigorate growth.

Also pressuring prices was a London Metal Exchange report showing that copper inventories climbed by 4,750 tonnes.

Technically, the main trend is down according to the daily swing chart, however, today’s session begins with copper in the window of time for a potentially bullish closing price reversal bottom.

The key level to watch today is the April 28 main bottom at 2.1740. Overtaking this level will signal the presence of buyers. It is likely to be fueled by profit-taking or short-covering. Given the bearish fundamentals, I doubt that real buyers are going to start playing the long side, however, aggressive speculative bottom-pickers may show some interest. The nearest resistance angle comes in at 2.2220.