Comex High Grade Copper Futures Technical Analysis – January 9, 2014 Forecast

March High Grade Copper futures are called lower this morning. The market sold off overnight as investors increased bets the Fed would continue to taper its monthly monetary stimulus throughout the year.

On Wednesday, copper futures weakened early in the session as the U.S. Dollar rose following the release of better-than-expected private sector jobs news from ADP Corp.  Late in the session, selling pressure hit copper again after the release of the Fed minutes. The minutes basically showed that the central bank would gradually decrease the amount of bond and mortgage purchases throughout the year. This news was supportive for the dollar which made copper more expensive to foreign traders.

In addition to lower foreign demand because of the stronger dollar, a weakening Chinese economy also weighed on prices. Today, the dollar could be affected by this week’s unemployment claims and monetary policy decisions by the Bank of England and the European Central Bank. A stronger dollar should keep the pressure on copper prices.

Technically, the main trend turned down on the daily chart when copper took out the last swing bottom at 3.3305. A new main top was formed at 3.3770 by the action.

This morning, the market is expected to open on the weakside of a retracement zone at 3.3500 to 3.3320. This should give the market a downside bias early. In addition, a downtrending angle at 3.3745 will become new resistance.

Based on the main range of 3.1580 to 3.4245, the retracement zone at 3.2915 to 3.2600 is the next major downside target. Another target is an uptrending angle at 3.2830. This angle is passing through the retracement zone today, creating a loose support cluster.

Because of the sharp sell-off overnight, investors should watch for downside momentum early in the session. This momentum may slow down once the 50% level is reached at 3.2915. A test of this level may attract some bottom-picking or lead to a round of profit-taking. Volume may drop late in the session because of Friday’s U.S. Non-Farm Payrolls report which can influence the direction of the dollar.