Comex High Grade Copper Price Futures (HG) Technical Analysis – In Position to Test Key Retracement Zone at $3.1685 to $3.1395

May Comex High Grade Copper futures posted a volatile two-sided trade in reaction to the release of the minutes from the Fed’s January FOMC meeting. The initial reaction to the minutes was bullish because traders interpreted them to mean the Fed was dovish in its outlook for inflation and interest rates.

The copper market closed on Wednesday before investors reinterpreted the tone of the minutes to hawkish. This sent the U.S. interest rates sharply higher, making the U.S. Dollar a more attractive investment. This also put pressure on dollar-denominated commodities like copper, leading to the lower trade on Thursday.

Daily Technical Swing Chart Analysis

The main trend is up according to the daily swing chart. The trend turned up late last week when buyers took the market to $3.2905. A trade through this level will signal a resumption of the uptrend. This move could trigger the upside momentum needed to challenge the December 18 top at $3.3335.

The main trend will turn to down on a move through $3.0465.

The short-term range is $3.0465 to $3.2905. Its retracement zone at $3.1685 to $3.1395 is the primary downside target. Since the main trend is up, buyers could show up on the first test of this zone.

The retracement zone is controlling the near-term direction of the market. A trade through it will not change the trend to down, but it will indicate the selling is getting stronger. It will also signal a shift in momentum to the downside.

Daily Technical Swing Chart Forecast

Based on the early price action, the direction of the May Comex High Grade Copper futures contract on Thursday will be determined by trader reaction to the 50% level at $3.1685.

A sustained move over $3.1685 will indicate the presence of buyers. If this generates enough upside momentum to take out the minor top at $3.2500 then we could see an eventual test of the last main top at $3.2905.

A sustained move under $3.1685 will signal the presence of sellers. This could create the downside momentum to trigger an acceleration into the Fibonacci level at $3.1395.

If buyers don’t come in strong enough on a test of $3.1685 to $3.1395 to stop the selling then copper prices could accelerate to the downside if $3.1395 is taken out with rising volume.

Watch the price action and read the order flow on a test of $3.1685 to $3.1395. Trader reaction to this zone will tell us if buyers have returned. A weaker dollar should help copper establish support. A stronger dollar is likely to fuel further downside action.