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Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

David de Ferranti, Currency Analyst

Talking Points

  • Copper prices soar as traders speculate on further Chinese capital market reforms
  • Gold and silver bounce off key support but remain vulnerable to waning geopolitical risks
  • Crude oil traders show signs of hesitation near the critical $100 a barrel handle

Copper prices soared during Asian trading today with newswires suggesting speculation over Chinese capital market reforms as the likely driver. The base metals may be in store for further volatility in the coming 24 hours with noteworthy economic data out of China on tap. Meanwhile, gold and silver have reversed earlier losses following tests of key support levels. Heading into the European session a light economic docket may leave the precious metals vulnerable to ebbing geopolitical concerns.

Base Metals Set For Volatility On China Data

Speculation over the loosening of restrictions on capital flows into China has likely bolstered copper prices and Chinese equities during Asian trading. As is often the case with news-flow from the region, details of the potential reforms are scarce at this stage. However new measures aimed at opening up the Chinese economy to foreign investment may help strengthen economic growth in the Asian giant, which in turn would bode well for demand for base metals like copper.

The chart below highlights the intraday price action for copper and the Hang Seng, which had posted a gain just over 2 percent as of 07:50 GMT.

Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

M15 Chart - Created Using FXCM Marketscope 2.0

A raft of second-tier Chinese economic data is likely to stir further volatility for the base metals over the next 24 hours. Chinese Retail sales figures will be of particular note given the gauge of consumer spending in the economy is resting at the lowest level since 2011. A downside surprise would likely add to concerns over a slowdown in economic growth in the Tiger economy, which in turn could weigh on copper.

Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

Source: DailyFX Economic Calendar

Precious Metals To Take Cues From Geopolitical Concerns

With few potential fundamental catalysts to sway the direction of the US Dollar in the session ahead, gold and silver may continue to be influenced by geopolitical risks. As has been argued in recent commodities reports, the absence of an escalation in Eastern Europe may leave gold vulnerable to declines as traders unwind fear-driven positioning. The outlook for gold over the remainder of the week is covered in the weekly forecast here.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil has broken below trendline support following the emergence of an Evening Star formation on the daily. Alongside building downside momentum (reflected by the rate of change indicator) and a move below the 20 SMA a bearish technical bias is offered. However, the daily close above the psychologically significant $100.00 handle suggests the potential for a short-term recovery which precludes new short positions at this stage. Sellers are likely to re-emerge at the 102.30 level of resistance.

Crude Oil: Waiting For Break Below $100 For New Shorts

Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Several Doji formations on the daily suggest hesitation from the bears as gold teases at a push below critical support at $1,277. With volatility remaining low (as reflected on the ATR), the current environment may favor range-trading setups, which is further supported by a lack of momentum signaled by the Rate of Change indicator.

The DailyFX Speculative Sentiment Index suggests a mixed bias for gold based on trader positioning.

Gold: Dojis Highlight Trader Indecision

Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

A Doji on the daily chart for silver denotes trader indecision near the all-important $19.00 handle. While the downtrend remains intact (signaled by the 20 SMA), new shorts would be better-served on a retracement back to resistance ($19.40) or break below $19.00. Low levels of volatility suggested by the ATR alongside fading downside momentum also hint at a more range-bound market environment for the precious metal.

Silver: $19.00 Handle Remains Critical Support…. For Now

Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

Copper has vaulted above its descending trendline from the 2014 high and cleared a notable resistance level at $3.085. With building upside momentum as suggested by the rate of change indicator and prices above the 20 SMA a bullish technical bias is offered.

Copper: Aims Higher Following Bullish Technical Signals

Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

Daily Chart - Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

Palladium has tumbled from its 2014 high in recent trading. The Doji candlestick formation on the daily helped indicate the bulls had lost their grip on prices near the critical $815.0 handle. Given the precious metal remains in an ascending trend channel new short positions may be better-afforded on a break below trendline support.

Palladium: Prices Collapse As Bulls Lose Momentum

Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

Daily Chart - Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

The formation of an Evening Star pattern near trendline resistance warns of a further pullback for platinum. A daily close below nearby support at $1,427 would be seen as an opportunity to enter new sell trades. A potential target is presented by the notable support level at $1,392.

Platinum: Bearish Signal Awaits Confirmation Near Key Support

Copper Soars Ahead Of China Data, Gold Bounces Off Key Support

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

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Contact and follow David on Twitter: @DaviddeFe

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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