By Tatyana Shumsky

Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Copper prices settled at a two-week high Wednesday, as a surge of technical trading was unswayed by sharply weaker U.S. economic data.

The most actively traded contract, for May delivery, settled up 2.7%, or 11.55 cents, at $4.4285 a pound on the Comex division of the New York Mercantile Exchange.

The thinly traded March delivery contract was up 2.7%, or 11.5 cents, at $4.4185 per pound.

Technical trading dominated the market Wednesday, with copper prices marching above the 50-day moving average early in the session. Crossing above this level signals an uptrend for technicians and trading algorithms, while crossing below it signals a downtrend.

"There are traders and computer based programs that execute trades automatically whether it makes sense or not," said Sterling Smith, analyst with Country Hedging.

The sharp move higher came amid "unusually low" trading volumes, Smith said. Just 33,791 copper contracts changed hands on the Comex by 1:56 p.m. in New York, nearly half the 61,850 contracts traded on March 15, when metal prices rallied off recent lows.

Copper prices briefly dipped on a surprise drop in U.S. new home sales, which fell 16.9% to a record low in February. The data, which came out at 10 a.m. saw copper prices slip to $4.3985 before resuming upward momentum.

"I'm always nervous of a market that rallies on low volumes in the face of fundamentally bad news, and the new home sales were as anti-copper as you can get," Smith said.

Copper is widely used in residential construction for electrical wiring and plumbing, and the sharp tumble in new homes sales is typically seen as negative for copper demand.

But technical indicators point to another step up for copper, as prices settled above the technically important 50-day moving average of $4.41 a pound.

"We're seeing a rally in a market that has overall been trending lower. To buck the trend and move higher we need to see some follow through...and get back above the key technical level," to resume upward momentum, said Matt Zeman, head of trading at Kingsview Financial.

A broad rally in metals markets helped boost trader confidence. Gold set a new record price at $1,438.0 per troy ounce while silver hit a fresh 31-year high of $37.198 per troy ounce.

"Overall risk appetite seems relatively high," said Zeman.

Progress at Japan's earthquake-damaged nuclear facility helped boost market sentiment. Workers at the Fukushima Daiichi nuclear complex hope to restore cooling systems to all the reactors in the next few days, after electricity was reconnected Tuesday. Authorities appear to be gaining control of the troubled plant and averting the risk of a nuclear meltdown.

But copper traders are watching for geopolitical flare-ups. Allied air strikes against Libyan leader Col. Moammar Gadhafi's forces continued for the fifth day Wednesday as the Western coalition's intervention in Libya's civil conflict continues.

Libya's crude oil exports have been disrupted by the fighting, and copper traders worry that a prolonged conflict will see higher energy prices pressure economic growth and curb demand for copper.

Copper is widely used in consumer electronics and household electrical products, and prices tend to weaken when economic growth slows.

-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; tatyana.shumsky@dowjones.com

Source: http://online.wsj.com/article/BT-CO-20110323-712222.html