Marshall Gittler
Trading Analysis
Copper futures
The dollar traded mixed against its G10 counterparts during the European morning Thursday. It was higher against NOK, AUD, NZD, SEK and CAD, in that order, while it was lower against JPY and GBP. The greenback was virtually unchanged against EUR and CHF.
Copper futures fell sharply on Thursday, as the commodity fraud at China’s Qingdao port hit bank financing of the metal, and as a result China, the world’s largest consumer of the metal, may have to cut its copper imports. On top of that, Wednesday’s unexpected drop in core US retail sales and the decline in the country’s PPI raised concerns whether the US recovery is on a stable path. The last time copper prices plunged with such strength was in March, amid fears about future demand from China. This time, investors are facing the possibility of lower demand in the US as well as in China. Since two of the main copper importers seems to encounter uncertain future demand for the metal, I would expect the price of the metal to decline even more.
Copper futures started tumbling sharply after finding resistance near the 3.1030 line, which lies fractionally below the 61.8% retracement level of the 16th September – 2nd October decline. Today, during the European morning, the metal moved below the key support barrier (turned into resistance) of 2.9830 (R1). I would now expect the price to challenge the next hurdle, at 2.9600 (S1). Bearing in mind our short-term oscillators, I believe that the price has the necessary momentum to challenge that line. The RSI moved lower after finding resistance at its prior upside support line, while the MACD, already below its trigger, fell below its black support line and also obtained a negative sign. On the daily chart, the price structure suggests a downtrend, thus I would consider the overall picture of copper to be negative. Further declines, below the 2.9600 (S1) obstacle, are likely to see scope for larger bearish extensions, perhaps towards the 2.9200 (S2) area.
Support: 2.9600 (S1), 2.9200 (S2), 2.8750 (S3)
Resistance: 2.9830 (R1), 3.0150 (R2), 3.0650 (R3)
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