Comex High Grade Copper Price Futures (HG) Technical Analysis – Capped by Chinese Demand Concerns, Supported by Weaker Dollar

December Comex High Grade Copper rebounded after early session weakness, but remained slightly below its 3-year high.  The weaker U.S. Dollar is the major tailwind supporting the market. Increased Chinese demand had been helping to drive prices higher, but investors are now saying that this news has been overestimated.

According to reports, it may have been Chinese regulators pushing wealth management products towards commodities that helped fuel the upside momentum in the market.  China said in June it will encourage wealth management firms to invest in commodity futures to promote its domestic derivatives industry and raise Chinese funds allocation to commodities. China accounts for nearly half of global copper demand.

Helping copper recover during the U.S. session today was a cheaper dollar. A lower U.S. currency makes dollar-denominated copper more attractive to foreign buyers, which could eventually boost demand.

The dollar extended recent losses against the Euro after the European Central Bank reaffirmed its ultra-easy monetary policy stance and kept the door open to increasing bond purchases.

Technical Analysis

The main trend is up according to the daily swing chart. However, the market has been treading water the past two days after hitting a 3-year high.

A trade through $3.1785 will signal a resumption of the uptrend. This could drive the market into the August 25, 2014 main top at $3.2245 and the July 23, 2014 main top at $3.2415.

The short-term range is $2.8935 to $3.1785. If there is a meaningful break then its retracement zone at $3.0360 to $3.0025 will become the primary downside target.

The nearest Gann support angle is $3.0735. This is followed by $3.0360 and $3.0025. Since the main trend is up, any of these levels are capable of stopping a price slide.

On the upside, the Gann target angle is $3.2535. Overtaking this angle will put copper in an extremely bullish position.