Comex High Grade Copper traders shifted their focus from the bearish supply and demand situation to the weakening U.S. Dollar, driving prices higher on Wednesday. The rally actually started in London where prices rose to their highest level in two weeks earlier today in reaction to disappointing U.S. economic data on Tuesday. A lower dollar tends to lead to increased demand from foreign traders.Short-sellers also reacted to the news that China may step up its fiscal policy efforts now that industrial metals prices are relatively low.
TECHNICAL ANALYSIS
The main trend is down according to the daily swing chart, however, momentum has shifted to the upside, following the formation of a new main bottom at $2.0695.
The short-term range is $2.2000 to $2.0695. Its retracement zone at $2.1350 to $2.1500 is the primary upside target. This zone falls inside the major retracement zone at $2.1290 to $2.1590, making it a valid target also.
Based on the current price at $2.1055, the direction of the market is likely to be determined by trader reaction to the long-term uptrending angle at $2.1090.
A sustained move over $2.1090 will indicate the buying is getting stronger. This could generate enough upside momentum to challenge a cluster of targets, including a downtrending angle at $2.1270, a long-term Fib at $2.1290, and a Gann angle/50% level combo at $2.1250. Since the main trend is down, we are likely to see sellers show up on a test of this resistance area.
A failure to overcome $2.1090 will indicate the return of sellers. This could lead to a retracement of the $2.0695 to $2.1190 short-term range. The major support angle comes in at $2.0705. This is followed closely by the main bottom at $2.0695. A trade through this level will signal a resumption of the downtrend.
Watch the price action and read the order flow at $2.1090. Trader reaction to this angle will tell us if the short-covering is continuing or if short-sellers are regaining control.
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