Comex High Grade Copper Price Futures (HG) Technical Analysis – Concerns Over China, U.S. Dollar Could Encourage Profit-Taking

The volatility in the U.S. Dollar on Thursday fueled a similar move in December Comex High Grade Copper as traders tried to sort out the details of the price action. Copper is a dollar-denominated commodity so a weaker dollar tends to drive up foreign demand, but a stronger dollar tends to pressure prices.

Profit-taking also hit the market just one-day after copper hit a multi-year high amid doubts about future demand in top metals consumer China. Bearish commentary also helped encourage investors to pare their long positions. Some analysts believe that Chinese economic data for August could be the trigger for a correction.

Others are saying that tight monetary policy during the first half of the year may have cooled the economy. Therefore, they expect that this should start showing up in weak economic data over the next few months.

In order to sustain the current rally, the dollar is going to have to retreat to encourage further buying. Otherwise, we could see a sideways-to-lower trade. Falling demand for higher-risk assets could also weigh on prices.

Technical Analysis

The main trend is up according to the daily swing chart. However, Thursday’s higher-high, lower-close may be a sign that the selling is greater than the buying at current price levels.

If the buying is strong enough to take out Thursday’s high at $3.0035 then the rally could extend into the October 29, 2014 main top at $3.0625.

A trade through $2.8935 will change the main trend to down. A move through $2.8795 will reaffirm the downtrend.

The short-term range is $2.6510 to $3.0035. If the trend changes to down then look for prices to fall into its retracement zone at $2.8275 to $2.7855.