September Comex High Grade Copper futures drifted on Friday before settling slightly better. The limited price action was related to the lackluster trade in the currency markets, particularly the U.S. Dollar, which consolidated a little after weakness earlier in the week.
It was the weakness in the Greenback that underpinned the dollar-denominated copper futures contract early in the week and that helped contribute to the rally that drove the industrial metal to a two-year high.
Technically, the main trend is up according to the daily swing chart. A trade through $2.9055 will signal a resumption of the uptrend. This could trigger a further rally into the May 15, 2015 top at $2.9375. This is also a potential trigger point for an acceleration to the upside with a major Fibonacci level at $3.0300 the next potential upside target.
After last week’s surge to $2.9055, the rally stalled, but the market was able to find support at the February 14, 2017 top at $2.8495, the former high for the year. This is likely because old tops tend to become new bottoms.
Additional support was provided by the major 50% level at $2.8305. Holding above this level and below the Fibonacci level at $3.0300 means the market is testing the retracement zone formed by the contract range created by the February 1, 2013 top at $3.6775 and the January 15, 2016 bottom at $1.9830.
The upside momentum is likely to continue as long as the U.S. Dollar remains under pressure and this is likely to continue if U.S. Treasury yields remain under pressure and the Fed continues to promote a dovish tone.
If $2.8300 fails as support then we could see a steep sell-off. This would likely be related to technically overbought factors, or a slowdown in the Chinese economy or an end to the numerous mining strikes affecting the supply.
This article was originally posted on FX Empire