Following a week of sideways consolidation copper futures have broken firmly higher today once again ending the trading session as a relatively wide spread up candle but marginally below the 390 price level of last week at 389.85, a rise of 11.35 on the day.  Last night’s FED statement has proved to be the catalyst that the markets had been waiting for, with commodities and general, and metals in particular, all gaining strongly on the back of a chronically weak dollar which now looks set to decline even further.  Throughout the recent short term pullback for copper the 40 day moving average remained unbroken, which gave us a strong technical signal that the longer term bullish trend was unlikely to break down and resume its upwards path in due course.  As such, we now have a strong platform of support in place and with the 9 day crossing back above the 14 day once again this is giving us a further bull cross signal.  Today’s price action also confirms this analysis with the low of the day having found strong support from the 14 day average. The longer term fundamental remains unchanged with copper mines continuing to struggle to meet demand as China’s appetite for the metal appears insatiable at present.

Copper Futures 21 Oct 2010

The December copper futures contract recovered much of the lost ground following yesterday’s sharp sell off, ending as a relatively wide spread up candle which just failed to breach the 9 day moving average and closing at 374.80.  This bullish reversal continued in the early commodity trading session this morning, reaching an intra day high of 385 before pulling back later this evening to trade at 378.2, down 1.2 on the day.  With prices having recovered back above the 14 day moving average and apparently providing additional support this evening, the bullish trend for copper appears to be firmly re-instated once again, and provided we see a break and hold above the key 387 level in the next few days then this will signal a clear intent of a further leg up in the recent trend and a run towards 400, which is our short term target for the commodity.  To the downside of the current price action the 40 day moving average continues to slope higher, offering excellent support to the uptrend, and with all three moving averages providing good support Tuesday’s sell off should be seen as a short term retracement only.

From a fundamental perspective copper mines continue to struggle to meet demand, particularly from the world’s largest consumer market which is China, and despite the interest rise this week which spooked the markets, particularly base metals, the fundamental picture remains the same.

In summary the futures contract trend in copper remains firmly bullish for copper trading.