* Copper heads for first annual decline in three years * LME copper may fall to $5,638 over 3 months -technicals * ECB says risks to financial stability have increased (Adds quote, details) By Jane Lee KUALA LUMPUR, Dec 20 (Reuters) - London copper inched up on Tuesday, edging off a two-day low in the previous session, as a euro zone pact to raise IMF resources boosted market confidence, though investors' year-end caution is set to push copper to its first annual decline in three years. Three-month copper on the London Metal Exchange gained 0.23 percent to $7,277 a tonne by 0750 GMT, reversing some losses from the previous session, when prices dropped 1.2 percent. The metal, used in pipes and wires, has fallen 24 percent this year. "The new measure is positive but seems to be a little less than what the market was expecting," said Ong Yiling, an investment analyst at Phillip Futures in Singapore. "With volume being thin as the year comes to an end investors are now staying on the sidelines, waiting to see what happens in the new year." Euro zone ministers agreed on Monday to boost IMF resources by 150 billion euros to ward off the debt crisis and won support for more money from EU allies, but it was unclear if the bloc would reach its 200 billion euro target after Britain bowed out. The European Central Bank said the risks to financial stability in the euro zone had increased considerably in the second half of this year, but a break-up of the single currency bloc is unthinkable. The most-traded March copper contract on the Shanghai Futures Exchange climbed 0.3 percent to 53,740 yuan ($8,500) a tonne. LME copper is biased to fall to $5,638 a tonne over three months, as indicated by its wave pattern and a Fibonacci projection analysis, according to Reuters technical analyst Wang Tao. The downtrend is also reflected in Shanghai copper, with prices expected to end the current consolidation within a triangle soon and fall to 44,650 yuan per tonne over the next three months, Wang said. The euro edged down in early Asian trade on Tuesday, creeping closer to an 11-month low hit last week after European Central Bank President Mario Draghi quashed hopes for more aggressive bond purchases that have helped control European yields. DOLLAR FACTOR The dollar climbed against a basket of major currencies on Tuesday, its first gain in four days. A stronger U.S. dollar may limit any increases in copper, as the greenback's gains make commodities more expensive for holders of other currencies. Base metals prices at 0750 GMT Metal Last Change Pct Move YTD pct chg LME Cu 7277.00 17.00 +0.23 -24.20 SHFE CU FUT MAR2 53740 160 +0.30 -25.21 LME Alum 1983.00 21.00 +1.07 -19.72 SHFE AL FUT MAR2 15750 25 +0.16 -6.47 HG COPPER MAR2 330.00 -0.85 -0.26 -25.67 LME Zinc 1855.00 17.00 +0.92 -24.41 SHFE ZN FUT APR2 14800 -10 -0.07 -24.01 LME Nickel 18380.00 0.00 +0.00 -25.74 LME Lead 1942.00 5.00 +0.26 -23.84 LME Tin 18800.00 105.00 +0.56 -30.11 LME/Shanghai arb 275 Shanghai and COMEX contracts show most active months ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month

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