Learn to Trade – Industrial Commodity Overview 30th July
Focus on COMEX Copper futures (Sep’10)
The last 3 weeks has seen COMEX Copper market trend higher. The drive higher has been largely lead by the return of risk appetite in the markets and a broad based sell-off of the USD.
Thoughts from the trading floor
The technical outlook for the market has become somewhat neutral with a slight short-term bullish bias. The market has continued to show some immediate term strength and has now reached a critical resistance area around the $328.10-$330.00 mark. A firm break above here would be the catalyst for an extended run higher to the $350.00 handle. The market formed a stabilising base around the 287.00-292.00 area and a break of this supporting base followed by a firm close below the $280.00 handle would be the required for another firm leg lower, providing bears with an ideal opportunity to take a position ahead of the yearly lows at $274.00. A break below here should push the market into a medium term bearish trend.
Quite noticeably, the copper market has remained resilient to the volatility in risk markets since May. The market is well known as being the leader of macro-fundamental trends. The continued short-term strength of the market would therefore suggest that risk has somewhat bottomed out in the short-term. However, with it being so close to a key short to medium term resistance area, a turn lower may serve to catalyse a broad based sell-off in risk assets across the board and thus provide further impetus to a move lower. The USD has also reached a key short to medium term support level and thus, as we saw from the turn off the recent lows in the copper, a renewal of the medium term uptrend in the USD should also coincide with a turn in the copper.
Interestingly we have also seen the recent trend of the USD underperforming low yielding currencies vs. the high yielding currencies confirmed as a new market flow. This would suggest that perhaps the move lower against the low yielders is a fairly temporary phenomenon as participants remain quite cautious in assuming risk and the moves in the low yielders is a bout of capitulation of long USD positions. This would support the idea that a quick turn-around of the USD would have a strong negative effect on the industrial metals markets.
Bull View
The bulls will be hoping that the short-term resilience shown over the last 2/3 weeks can continue and a continued affinity for risk trades across other risk asset classes will be enough to see the market steadily grind higher. They will cite that the short-term technical picture favours their view and look for a break and close above the $328.10-330.00 level to cement a medium term upward trend.
Bear View
The bears will see the market around a potential turning point. A confirmation of a turn-around in the Copper and USD may be required if bears are looking to re-establish control of the market.
Futex View
We have turned short-term bearish this week. With both the USD and copper around key medium term levels, we see a potential for a high impact short-position in the copper with a relatively tight stop above the $330.00 handle.
Tags: Bearish, Bulls, Comex, Commodity, copper, futex, futures, Industrial, USD
