Comex High Grade Copper Price Futures (HG) Technical Analysis – Sustained Move Over $2.7345 Bullish

September Comex High Grade Copper futures surged to their highest level since March 2 on Friday before erasing all of those early gains. However, enough buying came in late to produce a higher close for the day and the week. The rally into the 4 ½ month high was driven by strong growth in top copper consumer China, a weak U.S. Dollar and concerns over supply disruptions.

Earlier in the week, China reported that second quarter GDP expanded faster than expected, putting the economy in a position to meet the country’s growth target.

Late in the week, the U.S. Dollar was driven to multi-month lows after European Central Bank President Mario Draghi refrained from talking down the Euro while at the same time saying that discussions about tapering stimulus could begin in September.

There are several strikes taking place at this time that could lead to supply disruptions. Additionally, copper inventories at the Shanghai Futures Exchange-monitored warehouses fell 4.9 percent from last Friday to their lowest since January.

Reuters also reported that an estimated 5,000 workers at the giant Grasberg copper mine operated by Freeport-McMoRan Inc.’s Indonesian unit will extend their strike for a fourth month in a dispute over layoffs and employment terms.

Finally, according to industry data, the world refined copper market showed a 53,000 tonne deficit in April, compared with an 18,000 tonne deficit in March.

Technical Analysis

The main trend is up according to the weekly chart. Last week, this uptrend was reaffirmed when buyers took out the last swing top at $2.7425. The next upside target on the swing chart is the main top from the week-ending February 17 at $2.8495.

The main range is $2.8495 to $2.4850. Its retracement zone is $2.6675 to $2.7105. After straddling this zone for three weeks, copper finally broke out to the bullish side of this zone, putting it in a strong position to rally further.

Forecast

Based on last week’s close at $2.7225, the direction of the copper market this week is likely to be determined by trader reaction to the downtrending angle at $2.7345.

A sustained move over $2.7345 will indicate the presence of buyers. This move could generate the upside momentum needed to challenge the next downtrending angle at $2.7920.

The inability to overcome $2.7345 will signal the presence of sellers. This could lead to a quick test of the Fibonacci level at $2.7105, followed closely by an uptrending angle at $2.7050, the 50% level at $2.6675 and another uptrending angle at $2.6690. Since the main trend is up, any of these levels are capable of attracting buyers.

If the angle at $2.6690 fails as support then look for an acceleration to the downside since the next targets are $2.5990 and $2.5950.