Comex High Grade Copper Price Futures (HG) Technical Analysis – Close to Testing Major Retracement Zone

March Comex High Grade Copper prices closed higher for a third day on Friday after reaching its lowest level since September 28 earlier in the week. The catalyst behind the rally was a jump in Chinese imports which fueled expectations of stronger demand from the top consumer. Gains were capped, however, by a rising U.S. Dollar which limited foreign demand for the dollar-denominated industrial metal.

According to data released early Friday, China’s unwrought copper imports in November, at 470,000 tonnes, were up more than 40 percent from the previous month, a sign that winter production restrictions are driving up shipments.

Traders said that China demand will remain the focus for copper traders over the near-term. The key influence on the price action will be the China property market, which has been softening lately. Recent data shows that property sales by floor area in China fell 6.0 percent in October from a year earlier, compared with a 1.5 percent decline in September. The decline was the biggest since the first two months of 2015.

Daily Technical Analysis

March Comex High Grade Copper futures have been trending lower since the October 16 main top at $3.2790. At that time, the market spiked higher, putting it in severely overbought territory. The hedge funds probably stopped buying aggressively because they were already sitting on record high positions.

It’s easy to do, but don’t blame a strong U.S. Dollar for copper’s retreat from its highs. The Greenback is trading only slightly higher against a basket of currencies since copper’s October 16 top. I think the blame has to be placed on over optimism of Chinese demand and hedge fund hope, fear and greed.

The next play in copper is going to be based on a combination of value and Chinese demand.

The main range is $2.5200 to $3.2790. Its retracement zone at $2.8995 to $2.8100 is the value area. I expect to see buyers step in on a test of this zone. The buying is only going to stop the decline. It is going to take further confirmation of Chinese demand to fuel the rally.