September Comex High Grade copper futures closed lower last week, pressured primarily by a firmer U.S. Dollar and the threat of higher interest rates. The market posted an inside move following the previous week’s surge to a 12-week high.
This chart pattern suggests investor indecision and impending volatility. It could also be indicating that the market may be going through a transition period due to the rising interest rate environment.
Fundamentally, prices eased most of the week due to a surge in warehouse stocks, but the threat of strike action at two Chilean mines curbed losses.
As far as inventories are concerned, on-warrant copper inventories in LME warehouses – those not earmarked for shipment and available to investors – have soared by 47 percent to 213,900 since June 28 after inflows into mostly Asian depots, LME data showed.
The weakness in the market was offset by news that Chilean miner Antofagasta was facing potential strikes from workers and supervisors at two of its mines as contract talks continue.
Prices closed lower on Friday, solidifying the lower weekly close after stronger-than-expected U.S. labor market data supported the idea that the Fed would continue on its monetary tightening path.
Weekly Technical Analysis
The main trend is up according to the weekly swing chart. Last week’s inside move did not affect the trend.
A trade through $2.7185 will signal a resumption of the uptrend. This could trigger a fast move into the next main top at $2.7425. This is a potential trigger point for an acceleration into the next major top at $2.8495.
The main range is $2.8495 to $2.4850. Its retracement zone is $2.6675 to $2.7105. This zone has provided resistance the last two weeks. It is essentially controlling the longer-term direction of the market.
Forecast
Based on Friday’s close at $2.6470, the direction of the copper market next week is likely to be determined by trader reaction to the uptrending angle at $2.6650.
A sustained move under $2.6650 will indicate the presence of sellers. This could lead to a test of the downtrending angle at $2.6395. Crossing to the weak side of the angle at $2.6395 could trigger an acceleration to the downside with the next major target angle coming in at $2.5750.
A sustained move over $2.6650 will signal the presence of buyers. This could create enough upside momentum to overcome the 50% level at $2.6675.
Overcoming the 50% level at $2.6675 could create enough upside momentum to challenge the Fibonacci level at $2.7105, followed by the high at $2.7185 then the downtrending angle at $2.7445.