Copper trading outlook: futures steady after dipping on Tuesday; US and China data ahead

Copper futures kept around last sessions close during early trading in Europe today, after dropping on speculation of a stronger dollar yesterday. Tomorrow the very important manufacturing Purchasing Managers Indices for China and the US will be released, with forecasts of slight gains for both.

Copper futures for July, the most traded contract on the COMEX in New York, traded for $3.0745 per pound at 11:11 GMT, adding 0.05%. Prices ranged from $3.0630 to $3.0795 per pound. Yesterday the contract lost 0.65% on expectations of a stronger dollar.

Later today the Federal Open Market Committee (FOMC) will release its statement on monetary policy for the US, and a reduction in the Fed’s quantitative easing is expected. According to a Bloomberg poll, monthly assets purchases will decline by another $10 billion to $45 billion, following trimmings over the last three FOMC meetings, as the US economy recovers.

A strengthening US economy boosts the dollar, lifting the price of dollar-denominated goods, such as copper, for foreign currencies. At the same time a better industrial output would result in higher demand for the metal. These mixed readings lead investors to follow indicators with more immediate effects for copper, such as industrial output and construction.

Thursday will feature reports on the manufacturing PMI for both China, the leading consumer of industrial metals, and the US, the worlds top economy. Last week a report by HSBC and Markit put Chinas reading at 48.3, meaning contraction of activities, while the upcoming government report is forecast to record a 50.5 figure, translating into a slight growth. The US is set for a repeat of last weeks preliminary standing of 54.4, which fell short of expectations.

Adding to a projected steady industrial demand, physical demand for copper in China is growing, as construction enters active season. Additionally, the state reserve is buying massive amounts of bonded metal, perhaps to fuel a targeted 7 million new units of public housing this year. The ambitious plan is being implemented in an attempt to halt rising home prices in the world’s second economy.

Technical view

According to Binary Tribune’s daily analysis, in case Copper July futures manage to breach the first resistance level at $3.0922 per pound, they will probably continue up to test $3.1113. In case the second key resistance is broken, the contract will likely attempt to advance to $3.1242.

Should the red metal breach the first key support at $3.0602, it may continue to slide and test $3.0473. With this second key support broken, the movement to the downside will probably continue to $3.0282.