Copper trading outlook: futures remain steady as negative Chinese outlook battles positive US and EU expectations

Copper faced an organized retreat today, as demand outlook in the worlds biggest consumer – China, stemmed negative sentiment. Economic reports from the Eurozone and the US due this week are expected to show limited growth in their manufacturing sectors, fanning positive sentiment over copper demand.

Copper futures for settlement in May fell by 0.20% to trade at $3.0370 per pound at 12:21 GMT on the COMEX division of the New York Mercantile Exchange. Prices varied between $3.0480 and $3.0255 during the day. Todays drop adds to yesterdays 0.07% loss, while futures grew by 1.91% the previous two sessions.

Copper is facing limited gains with expectations of easing of the slowdown in manufacturing activity in the worlds biggest consumer, as HSBCs Manufacturing PMI for China, due tomorrow, is expected to show minor improvement and register at 48.4 for April, up from 48.0 for March. The figure remains below the 50 mark for a fourth month though, signifying persisting contraction in factory activity in China, spreading negative sentiment.

Also tomorrow, the report on the Manufacturing PMI in the Eurozone is expected to show no change in the blocs factory output growth, while reports on Germany and France are forecast to show a slight gain and a slight slowdown, respectively. All three indices, however, remain above 50, confirming growth in the Eurozones manufacturing sector.

Wednesday will also see the report on US Manufacturing PMI, which is probably going to reveal growth in manufacturing activity in the worlds largest economy, to stand at 56, up from last months 55.5 reading. New Home Sales, however, are projected to have shrunk by 3.3% in March, pushing down on copper.

Every positive report on the US economy, though, in addition to providing some security for copper demand, boosts the dollar, which in turn makes dollar-denominated raw materials, such as copper, more expensive for foreign currency holders and lessens their appeal as an alternative investment. Tim Evans, chief market strategist of Long Leaf Trading Group Inc. in Chicago, said for Bloomberg: “We’ve had a push up in the dollar and that caused a negative price action.”

On Thursday, the Ifo Institute for Economic Research will release its German Business Climate Index, which is expected to have registered at 110.5 in April from 110.7 in March. On the other side of the Atlantic, the US Labor Department will likely report a minor rise in initial jobless claims, while the Commerce Department is expected to release data showing a jump in core durable goods orders in March.

On Friday are due retail sales in the U.K. for March, poised to show a decline on monthly basis and a minor advance year-on-year, while in the US the final reading of the University of Michigan Consumer Sentiment Index for April is expected to have marked a rise to 83.0, which, if confirmed, would be the highest level since July.

Previously, figures from last week unveiled that the Chinese economy grew with slightly better-than-expected pace for the first quarter of 2014, but it still was the lowest growth for the last 6 quarters. Bearish reports were capped to some extent by robust data from the US. Industrial output, retail sales, employment and consumer inflation all showed better-than-expected numbers, helping demand for copper in the worlds largest economy.

Technical view

According to Binary Tribune’s daily analysis, in case Copper May futures manage to breach the first resistance level at $3.0548 per pound, they will probably continue up to test $3.0667. In case the second key resistance is broken, the industrial metal will likely attempt to advance to $3.0783.

If the contract manages to breach the first key support at $3.0313, it may continue to slide and test $3.0197. With this second key support broken, the movement to the downside will probably continue to $3.0078.