Comex High Grade Copper Price Futures (HG) Technical Analysis – Getting Ready to Roll Over to the Downside

September Comex High Grade Copper futures traded lower on Tuesday in reaction to weaker prices in London, a stronger U.S. Dollar and a series of disappointing economic reports from China.

Overbought technical conditions helped drive copper prices lower in London in a move that spilled over into the New York copper market.

The U.S. Dollar continued to rise on Tuesday, making dollar-denominated copper more expensive for foreign investors. This helped to slice into demand.

The dollar was supported by increased demand for higher-yielding assets as traders reacted positively to developments over the crisis between the United States and North Korea.

Stronger-than-expected U.S. retail sales helped drive up U.S. Treasury yields while increasing the chances of a Fed rate hike later this year. This news also made the U.S. Dollar a more attractive investment. The Empire State Manufacturing Index also came out better-than-expected, posting a reading of 25.2 versus a 10.1 estimate.

Traders also continued to digest the weak economic news from China which raised questions about future demand. China’s industrial output, investment, retail sales and trade all grew less than expected last month.

Technical Analysis

The main trend is up but the over month-long rally is beginning to lose upside momentum. A trade through $2.9550 will signal a resumption of the uptrend, but a move through $2.8600 will change the main trend to down.

The short-term range is $2.9550 to $2.8715. Its 50% level or pivot is $2.9135. This price is controlling the short-term direction of the market. Closing below this level is helping to give the market a downside bias.

If the trend changes to down on the move through $2.8600 then look for the selling to continue into a major 50% level at $2.8305.

The main range is $2.8310 to $2.9550. If the trend changes to down then its retracement level at $2.7930 to $2.7550 will become the primary downside target.

On the upside in addition to the pivot at $2.9135, resistance angles drop in at $2.9150 and $2.9350. The latter is the last potential resistance angle before the main top at $2.9550.

The major long-term support angle is at $2.8910. Crossing to the weak side of this angle will put the market in a bearish position.

The combination of the bearish fundamentals and the developing chart pattern strongly suggest that copper is getting ready to roll over to the downside.

We’ll be switching to the December futures contract on Thursday.