Copper breaking key levels and trending lower

Four key markets in focus today.

High grade copper

The trend in copper is clearly lower, and having broken below a number of key levels (including the multi-month head and shoulders pattern) it looks destined to head lower over the medium to longer term. The 30,000 (or $3.00 per pound) level will be key for the short trade, and what’s interesting is that the PBOC has turned more accommodative of late. This in theory could support the metal, however all eyes now fall on today’s HSBC manufacturing print at 12:45 (AEDT), with the market expecting a slight improvement in the pace of contraction (with a reading of 48.7 from 48.3).

EUR/GBP

I recently look at selling EUR/GBP at 0.8360, however I want to tighten potential stops to 0.8345. In fact, just from a central bank stance we are hearing much more negative rhetoric from the ECB of late, and price action in the pair is becoming much more neutral and thus I am concerned the pair could start to roll over. Options structures have become more favourable for shorts and positioning in sterling is the least over-owned since Q3 2013. Between 19:00 and 20:00 AEDT we get French, German and European manufacturing and this could be of key interest for EUR bulls. A break of the March 19 high of 0.8400 would be very positive for my potential trade idea.

AUD/NZD

I looked at being long at 1.0605 recently, given the more bullish price action of the low prints. I continue to hold longs from 1.0605 (1.0650 at the the time of writing today), but have now moved my stop loss to 1.0589 to lock in the downside and continue to focus on the 1.0700 level. It’s also bullish to see the March downtrend give way, and this is also very encouraging for my potential trade idea.

Spot gold

The key level to watch this week will be $1330, which is the trend support drawn from the year’s low at $1182. With EUR/USD looking like it might head south over the coming weeks, and USD/JPY also looking supported on dips, gold should continue trade inversely to the USD and therefore this trend line support could be the key to near-term price action. Until this trend is broken I will have a moderately bullish bias (at least from a technical perspective). Key support then comes in at $1312, which is the 38.2% retracement of the rally from $1182 to $1392 we’ve seen this year; a closing break here would suggest a strong sell signal for the bears.

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