Commodities Aim Higher as Risky Assets Find Support, US Data in Focus

Talking Points

• Crude Oil, Copper Aim to Follow Stocks Higher as Market Sentiment Recovers
• Gold and Silver Looking to Balance Cues from Risk Trends, QE3 Expectations

Commodity prices are yielding mixed results in European trade as traders wait for guidance from the US economic data set to establish near-term direction cues. May's US Consumer Confidence reading and the Dallas Fed Manufacturing Activity gauge are on tap, with expectations pointing to improvements on both fronts. Broadly speaking, data collected by Citigroup suggests US economic data has stabilized relative to expectations in May after three months of deterioration. This lays the foundation for stronger outcomes to buoy hopes that a firming (albeit unevenly so) recovery in North America can help offset weakness in Europe and Asia.

In the context of heavy selling across the risky asset space over recent weeks, this may help drive a recovery in sentiment. As noted yesterday, this would fall within the context of a general tendency toward corrective profit-taking on risk-off exposure accumulated over recent weeks. This bodes well for growth-geared crude oil and copper prices and may likewise offer a lift to gold and silver amid ebbing demand for the safe-haven US Dollar. Upside momentum in the precious metals space may be limited however in that firmer data would work against QE3 expectations, denting the appeal; of alternative store-of-value assets. S&P 500 stock index futures are pointing firmly higher ahead of the opening bell no Wall Street, reinforcing the likelihood of a risk-on scenario in the hours ahead.

WTI Crude Oil (NY Close): $90.86 // +0.20 // +0.22%

Prices put in a Harami candlestick pattern above resistance-turned-support at 90.14, the September 7 closing high, hinting a corrective bounce may be ahead. Positive RSI divergence reinforces the case for an upside scenario. Initial resistance lines up at 92.51, a former support marked by the December 16 low, with a push above that targeting 95.41 (another former bottom now acting as resistance at the February 2 low).

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1580.94 // +7.91 // +0.50%

Prices continue to consolidate above support in the 1522.50-1532.45 area. Near-term trend line support-turned-resistance lines up at 1584.56. A break above this boundary exposes the 1600/oz figure followed by the top of a channel set from late February, now at 1621.73.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.39 // -0.13 // -0.47%

Prices are recovering from support at 27.06 after putting in a Bullish Engulfing candlestick pattern to aim at resistance at 28.70. A break above this level initially exposes 29.71. Alternatively, a reversal through support exposes the 26.05-15 area.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.448 // +0.020 // +0.58%

Prices are mounting a recovery from support at 3.438, the 100%Fibonacci expansion. Positive RSI divergence reinforces the case for an upside scenario. Initial resistance lines up at 3.537, the 76.4% expansion level. Alternatively, a break below support exposes the 123.6% level at 3.327.

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line Distribution List to ispivak@dailyfx.com