Talking Points

  • Commodities Soar as Markets Find QE3 Hopes in Bernanke Testimony
  • Philadelphia Fed Upside Surprise May Pour Cold Water on Risk Appetite

Commodity prices are on the upswing as markets revel in Fed stimulus expectations after two days of Congressional testimony from Ben Bernanke drove hopes that additional help may be on the way. S&P 500 stock index futures are pointing firmly higher ahead of the opening bell on Wall Street, hinting the growth-geared crude oil and copper prices are positioned to follow stocks higher while gold and silver capitalize on fading haven demand for the US Dollar.

The chipper mood may prove fleeting however as July's Philadelphia Fed gauge of US business confidence comes across the wires. An upside surprise along the lines of the Empire Manufacturing print earlier in the week may yield evidence of stabilization early in the second quarter, reminding investors that further Fed accommodation is far from certain and rekindling risk aversion to sink growth-linked assets and boost the greenback as debasement fears subside.

WTI Crude Oil (NY Close): $89.87 // +0.65 // +0.73%

Prices are probing above the 90.00 figure after taking out the 38.2% Fibonacci retracement at 88.40. The next key layer of resistance lines up at 91.84, the 50% Fib, with a break higher exposing the 61.8% retracement at 95.29. The 88.40 level has been recast as near-term support.

Commodities_Rally_Vulnerable_if_Philadelphia_Fed_Data_Outperforms_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1573.52 // -9.88 // -0.62%

Prices slipped back below 1575.81, the 38.2%Fibonacci expansion, exposing the 50% level at 1555.83. This barrier is reinforced by a rising trend line set from the May 16 low. A break downward exposes the 1522.50-32.45 region. Near-term resistance lines up at the 1600/oz figure, a psychological barrier compounded by the presence of the 23.6% Fib.

Commodities_Rally_Vulnerable_if_Philadelphia_Fed_Data_Outperforms_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $27.19 // -0.13 // -0.48%

Prices continue to tread water above support is at 26.75. A break below that exposes the multi-month triple bottom at 26.05. Trend line resistance is now at 27.67, with a breach above that exposing the July 3 high at 28.44.

Commodities_Rally_Vulnerable_if_Philadelphia_Fed_Data_Outperforms_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.474 // +0.018 // +0.52%

Prices continue to move higher after taking out resistance at 3.445, the 14.6% Fibonacci expansion. The bulls now aim to challenge 3.535, with a break above that exposing 3.618. The 3.445 level has been recast as near-term support, with a break below that targeting the 23.6% Fib at 3.378.

Commodities_Rally_Vulnerable_if_Philadelphia_Fed_Data_Outperforms_body_Picture_6.png,

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