Commodities continue to look to Eurozone debt crisis management strategy to guide sentiment. Guidance within a batch of Q3 earnings reports is likewise in focus.

Talking Points

  • FinMin Summit, Merkel and Draghi Key with Euro Debt Crisis Policy in Focus

  • Greek Bill Auction Results May Reveal Markets’ Satisfaction with EU Efforts

  • Guidance in Q3 Earnings Reports May Shape Growth Outlook, Risk Appetite

The focus remains on a meeting of Eurozone finance ministers in Luxembourg. Against this backdrop, ECB President Mario Draghi is due to speak before the European Parliament Economy Committee while German Chancellor Angela Merkel visits Greece.

Traders continue to look for signs of reconciliation between Athens and “troika” monitors that open the door for disbursement of the latest batch of bailout funding. Guidance on the likelihood and timing of a Spanish request for a full-on rescue package is also sought.

The results of a Greek bill auction may offer a timely gauge of investors’ perception of policymakers’ progress, with markets eyeing average yield and bid-to-cover readings. The poster-child for the Eurozone debt crisis will attempt to sell €1 billion in 6-month paper.

The economic calendar remains lackluster but the third-quarter corporate earnings docket may prove market-moving as Chevron Corp, Yum! Brands Inc and Alcoa Inc report results. All three companies are relatively sensitive to trends in the global business cycle, meaning traders will be keen to comb through their guidance on likely performance going forward to help shape risk appetite trends.

On balance, a net sentiment-negative outcome to the varied mix of catalysts on offer stands to weigh growth-anchored crude oil and copper prices. Meanwhile, gold and silver may decline as ebbing risk appetite boosts haven demand for the US Dollar. Needless to say, a broadly risk-positive tone is likely to produce the inverse dynamic.

WTI Crude Oil (NY Close): $89.33 // -0.55 // -0.61%

A burst of seesaw volatility last week has left prices locked between support at 87.70 and resistance at 92.56, the 38.2% and 23.6% Fibonacci expansions respectively. A break above resistance exposes the underside of a rising channel set from early July, now at 97.21. Alternatively, a drop through support targets the 50% expansion at 83.76.

Commodities_Continue_to_Look_to_Euro_Debt_Crisis_Policy_for_Direction_body_Picture_3.png, Commodities Continue to Look to Euro Debt Crisis Policy for Direction

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1774.95 // -5.65 // -0.32%

Prices broke through support at a rising trend line set from mid-August after completing a bearish Dark Cloud Cover candlestick pattern below resistance in the 1790.55-1802.80 area, hinting a move lower is ahead. Negative RSI divergence reinforces the case for a downside scenario. Secondary support at the bottom of a Rising Wedge chart pattern is now at 1769.30, with a break below that exposing the 23.6% Fibonacci retracement at 1747.20. Alternatively, a break above 1802.80 targets 1850.00 and the 1900/oz figure.

Commodities_Continue_to_Look_to_Euro_Debt_Crisis_Policy_for_Direction_body_Picture_4.png, Commodities Continue to Look to Euro Debt Crisis Policy for Direction

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video.

Spot Silver (NY Close): $33.98 // -0.54 // -1.56%

Prices followed the completion of a Bearish Engulfing candlestick pattern with a drop to range support at 33.66, a barrier reinforced by the 23.6% Fibonacci retracement at 33.18. A break below the latter boundary exposes the 38.2% Fib at 31.83. Negative RSI divergence reinforces the case for a downside scenario. Near-term resistance stands at the 35.00 figure, with a break above that initially targeting the October 28 2011 high at 35.66.

Commodities_Continue_to_Look_to_Euro_Debt_Crisis_Policy_for_Direction_body_Picture_5.png, Commodities Continue to Look to Euro Debt Crisis Policy for Direction

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video.

COMEX E-Mini Copper (NY Close): $3.718 // -0.060 // -1.59%

Prices continue to consolidate below resistance at a falling trend line set from early February (3.821). A break higher exposes swing highs at 3.955 and 3.988. Near-term support lines up at 3.707, the 23.6% Fibonacci retracement. A push below that targets the 38.2% level at 3.627.

Commodities_Continue_to_Look_to_Euro_Debt_Crisis_Policy_for_Direction_body_Picture_6.png, Commodities Continue to Look to Euro Debt Crisis Policy for Direction

Daily Chart - Created Using FXCM Marketscope 2.0

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

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