Based on Friday’s price action, the direction of the July Comex High Grade Copper futures contract is likely to be determined by trader reaction to the 50% level at $3.0885.
A stronger U.S. Dollar helped drive copper prices down on Friday. The greenback rose in reaction to a steep plunge in crude oil futures which drove down demand across the board for dollar-denominated copper.
Losses were likely limited by expectations of increased demand later this year and forecasts of a supply deficit by the end of the year.
On Friday, July Comex High Grade Copper settled at $3.0775, down $0.0185 or -0.60%.
The main trend is up according to the daily swing chart. A trade through $3.1485 will signal a resumption of the uptrend. The main trend will change to down on a move through $3.0345.
Copper has been rangebound the entire month of May because of the mixed fundamentals and the lack of hedge fund interest.
The main range is $2.9585 to $3.2180. Its retracement zone is $3.0885 to $3.0575. The market straddled this zone all week.
The short-term range is $3.2180 to $3.0140. Its retracement zone at $3.1160 to $3.1400 has been acting like resistance. Additional resistance is the long-term 50% level at $3.1315. Copper took out this zone early last week, but the rally failed at $3.1485.
Based on Friday’s price action, the direction of the July Comex High Grade Copper futures contract is likely to be determined by trader reaction to the 50% level at $3.0885.
A sustained move under $3.0885 will indicate the presence of sellers. This could drive the market into the main Fib level at $3.0575. If it fails, sellers will run into a series of lows and bottoms at $3.0485, $3.0345 and $3.0140. Look out to the downside if $3.0140 fails. The daily chart indicates the next potential downside target is $2.9585.
A sustained move over $3.0885 will signal the presence of buyers. This could trigger a spike into a pair of 50% levels at $3.1160 and $3.1315 and a short-term Fib level at $3.1400.
Taking out last week’s high at $3.1485 could trigger an acceleration to the upside. The daily chart indicates there is room to run to $3.1890 and $3.2180.
The longer copper stays in the range, the bigger the move once traders determine a direction.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.