Talking Points

  • Crude Oil, Copper Follow Shares Higher as Risk Appetite Corrects
  • Gold and Silver Find Support on Waning Haven Demand for US Dollar

Risk appetite trends appear to be shrugging off softer Chinese and Eurozone PMI figures, with European shares on the upswing and growth-geared crude oil and copper prices following suit. Meanwhile, waning haven demand is pressuring the US Dollar, allowing an upside correction for anti-fiat gold and silver prices. S&P 500 stock index futures have erased earlier losses and now trade firmly in positive territory ahead of the opening bell on Wall Street, reinforcing the likelihood of a recovery across the sentiment landscape as North America comes online.

While the chipper mood is undoubtedly running counter to economic data, recent price action offers context to explain what may be happening. Risky assets have faced unrelenting selling pressure over the past three weeks with very little corrective recovery in the interim. With the EU leaders' summit in the rearview mirror and growth indicators reinforcing the seriousness of already well-known headwinds facing global output from the Eurozone and China, the supply of near-term negativity that can conceivably strike the markets may be running dry. Broadly speaking, this opens the door for a corrective recovery until the bears find fresh fodder to fuel downward momentum as the second Greek election approaches in mid-June.

The US economic calendar appears broadly supportive of an improving risk appetite profile. Durable Goods Orders are expected to rise in April after a sharp dip in March, the Kansas City Fed manufacturing activity index is forecast to rise in May after two consecutive months of losses, and weekly Jobless Claims numbers are set to yield a modest but broadly positive result. While Initial Claims are expected to hold at 370K for a second week, Continuing Claims are due to edge lower to 3250K.

WTI Crude Oil (NY Close): $89.90 // -1.95 // -2.12%

Prices continue to test resistance-turned-support at 90.49, with a break lower initially exposing the 61.8% Fibonacci retracement level at 88.54. Near-term resistance lines up at 92.51, a former support marked by the December 16 low, with a push above that targeting the February 2 low at 95.41.

Commodities_Rise_Despite_Dismal_Chinese_Eurozone_PMIs_-_Why_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1561.45 // -7.05 // -0.45%

Prices recoiled from resistance marked by the 1600/oz figure as well as the 50% Fibonacci retracement level at 1599.17, taking out support at 1582.10 marked by the 38.2% level and exposing the next downside objective at 1560.98. A break below this boundary exposes the 1522.50-1532.45 area. The 1582.10 level is acting as resistance.

Commodities_Rise_Despite_Dismal_Chinese_Eurozone_PMIs_-_Why_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.18 // -0.29 // -1.00%

Prices are reversing lower from resistance at 28.70, with sellers once again aiming to challenge support at support at 27.06. A break lower exposes the 26.05-15 area. Alternatively, a reversal back through resistance on a daily closing basis targets the next upside barrier at 28.70.

Commodities_Rise_Despite_Dismal_Chinese_Eurozone_PMIs_-_Why_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.396 // -0.092 // -2.64%

Prices are testing through support at 3.438, the 100%Fibonacci expansion, with a break below that exposing the 123.6% level at 3.327. Near-term resistance lines up at 3.537, the 76.4% expansion level.

Commodities_Rise_Despite_Dismal_Chinese_Eurozone_PMIs_-_Why_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