December Comex High Grade Copper futures soared to their highest level on more than three-years on renewed optimism over China’s economic outlook.
Prices in New York started higher early in the session after copper on the London Metal Exchange jumped 2.9 percent, touching an August 2014 high.
The rally was primarily supported by upbeat economic data from China. It’s producer price inflation unexpectedly accelerated to a six-month high in September as a construction boom showed no signs of abating and a government crackdown on air pollution triggered fears of winter shortages.
In other news, China’s unwrought copper imports surged by 26.5 percent in September from a year ago, customs data showed on Friday, but remained on course for an annual drop in 2007.
China’s economy is expected to grow by 7 percent in the second half of this year, the country’s central bank governor said, defying economists’ expectations for a slowdown.
Finally, hedge funds and money managers raised their net long positions in copper futures and options for the first time in five weeks, in the week to October 10, according to the U.S. Commodity Futures Trading Commission.
Later in the week on Thursday, the next market driver is likely to be China’s third-quarter gross domestic product number. It is expected to provide more confirmation of demand in metals.
Daily Technical Analysis
The main trend is up according to the daily swing chart. The huge rally on Monday was not surprising because based on Friday’s close at $3.1335 and the chart pattern, there was plenty of room to the upside.
Buyers took advantage of the lack of resistance and drove the market into the nearest targets which were the August 25, 2014 top at $3.2245 and the July 13, 2014 top at $3.2415.
The test of these levels marks decision time for traders because it’s possible that the market is overbought and susceptible to profit-taking.
A sustained move under $3.2245 will signal the presence of sellers. This could trigger a steep correction back to an uptrending angle at $3.1060.
If buyers can build a support base over $3.2415 then look for a possible extension of the rally into the December 26, 2013 main top at $3.2930.
This article was originally posted on FX Empire