Comex High Grade Copper Price Futures (HG) Technical Analysis – Strong Dollar Could Trigger Correction

September Comex High Grade Copper futures closed lower on Monday after the market failed to follow-through to the upside following last week’s strong rally and after the release of upbeat purchasing manager’s data from China. Some traders blamed the stronger U.S. Dollar for pressuring foreign demand.

Early in the session, traders had the opportunity to react to the official Chinese PMI, which rose to 51.7 in June. It was the eleventh consecutive month on the positive side of the 50-level that marks expansion from contraction in the world’s biggest manufacturing sector.

Although copper gained ground in Asia, prices retreated in London as London Metal Exchange data showed inventories grew, indicating supplies are plentiful. This divergence spillover to the U.S. market, giving investors an excuse to lighten up their long positions.

Technical Analysis

The main trend is up according to the daily swing chart. A trade through 2.7185 will signal a resumption of the uptrend. The market is also up 12 session from its recent bottom which puts it in a position to form a potentially bearish closing price reversal top.

On Monday, the market posted an inside move which indicates investor indecision and impending volatility. It could also be an indication that the market is entering a transition period that could lead to a change in momentum from up to down. This will likely be triggered by a stronger U.S. Dollar.

Copper is also trading inside the major retracement zone, bounded by $2.6675 and $2.7105. Trader reaction to this zone will determine the near-term direction of the market.

If $2.5490 to $2.7185 becomes the new short-term range then we could see a correction into its retracement zone at $2.6340 to $2.6140.

Forecast

The Fibonacci level at $2.7105 has provided resistance the last three days. So we have to conclude that this level is controlling the direction of the market.

A sustained move under $2.7105 will indicate the presence of sellers. This could drive the market into an uptrending angle at $2.6690 and the main 50% level at $2.6675.

Taking out $2.6675 could trigger an acceleration to the downside later this week.

Overcoming the Fib level at $2.7105 will signal the presence of buyers. This could generate the upside momentum needed to challenge $2.7185 and the long-term downtrending angle at $2.7295.

The angle at $2.7295 is the trigger point for an acceleration to the upside with $2.7895 the next likely target.