Comex High Grade Copper Price Futures (HG) Technical Analysis – Sellers Still Defending the Downtrend

July Comex High Grade Copper futures are trading flat early Thursday, after selling off the previous session on concerns that slowing economic growth in China could hit demand from the world’s top metals consumer.

Prices plunged early Wednesday on the news that Moody’s Investors Service downgraded China’s credit ratings for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

Some of the early losses were erased late in the session after the U.S. Dollar weakened in reaction to the release of less-hawkish minutes from the Fed’s meeting on May 3. The price action also suggests that traders may have also priced in China’s weakening economy.

Technical Analysis

The main trend is down according to the daily swing chart. The market is up since the $2.4725 main bottom on May 8, but momentum hasn’t officially shifted to the upside because buyers have had trouble overcoming the retracement zone at $2.5835 to $2.6070. This likely means that sellers have been defending this zone and that the 13 session rally has been fueled by a slow short-covering rally.

If buyers can take out $2.6045 with conviction, we could see a near-term spike into the major 50% level at $2.6515.

If a short-term range forms between $2.4725 and $2.6045 then look for a near-term correction into its retracement zone at $2.5385 to $2.5230.

Forecast

Based on the early price action, the direction of the copper market today is likely to be determined by trader reaction to the 50% level at $2.5835.

A sustained move over $2.5835 could triggered a labored rally into a cluster of numbers at $2.6025, $2.6045 and $2.6070.

We could see a technical bounce on the first test of this area. However, taking out $2.6070 could trigger an acceleration to the upside with the next major target area $2.6495 to $2.6515.

A sustained move under $2.5835 will signal the presence of sellers. The daily chart is wide open to the downside so traders should watch for a possible acceleration into a support cluster at $2.5385 to $2.5375.

Watch the price action and read the order flow at $2.5835 all session. Trader reaction to this level will tell us if the buying is getting stronger or if sellers are still in control.