A risk rally took place at the end of the week as growth worries are reduced among mixed economic data. Copper futures have seen the largest weekly rally since December on pure speculation that demand will increase in China, even though data has shown that manufacturing and gross domestic product is declining.
Frank Lesh, a trader at FuturePath Trading LLC, said “we expect to see some Chinese purchases.” Although, Lesh said there was an oversold rebound in copper. The London Metal Exchange reported a decline of 16 percent in stockpiles this year, the lowest since December 2012.
Copper futures have been trending upwards on the 4H after bouncing off the 30-day low of $3.175. However, the last several candles have been rejected at $3.2472, although it remains stable with the 72 EMA offering support at $3.2383.
A Fibonacci fan applied to the 30-day high and low shows potential upside targets for copper, given that price action can break through current resistance. Price action has been able to close above the first fan prong near $3.2421, and momentum, although lessened through Friday’s close, is still positive. A move to price action resistance, and upside target, is probable at $3.2687.
Look to see a cap on upside near the 200 EMA and second prong of fan between $3.273/76. However, copper is very sensitive to economic data and speculative in nature.