Talking Points

  • Crude Oil, Copper to Rise if Soft US Jobs Data Stokes Fed Easing Outlook
  • Gold and Silver Price Action to Mirror Impact of QE3 Bets on US Dollar

All eyes are on the US Employment report into the end of the trading week. Expectations call for the economy to add 100,000 jobs in June, marking the largest increase in three months. US economic data has increasingly underperformed expectations over the past two months, hinting investors are likely to interpret the result in terms of its implications for the likelihood of another round of Federal Reserve quantitative easing (so-called QE3). Markets were disappointed after yesterday's policy efforts from the ECB and the BOE fell broadly in line with expectations, sharpening hopes that Fed may soon deliver a lifeline.

With that in mind, a disappointing increase in hiring is likely to boost risk appetite as QE3 bets rebuild, driving crude oil and copper higher amid a broad-based advance in risk appetite. Gold and silver are likewise likely to fare well as fears of US Dollar dilution stoke demand for store-of-value alternatives. Needless to say, a print that trumps forecasts can be expected to have the opposite effect as stimulus hopes fade. A pick-up in the service-sector ISM employment index as well as yesterday's firm ADP print seem to tilt surprise risk toward the latter scenario.

WTI Crude Oil (NY Close): $87.22 // -0.44 // -0.50%

Prices are showing a Shooting Star candlestick, hinting at ebbing bullish conviction and warning that a pullback may be ahead. Overall positioning continues to broadly favor the upside however, with the break of the 23.6% Fibonacci retracement at 85.11 arguing for a forthcoming test of resistance at 89.97 marked by the 38.2% level and reinforced by the psychologically significant 90.00 figure. A break back below 85.11 is needed to neutralize upside pressure, exposing 81.19 anew.

Commodities_to_Rise_if_Disappointing_US_Jobs_Data_Fuels_Stimulus_Bets_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1604.68 // -10.95 // -0.68%

Prices completed a bearish Evening Star candlestick pattern below falling trend line resistance set from late March, hinting a move lower is ahead. Initial support lines up at the 1600/oz figure, a psychological barrier reinforced by the 23.6% Fibonacci expansion. A break below that exposes the 38.2% level at 1575.81. Trend line resistance is now at 1618.43.

Commodities_to_Rise_if_Disappointing_US_Jobs_Data_Fuels_Stimulus_Bets_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $27.67 // -0.47 // -1.65%

Prices put in a bearish Evening Star candlestick formation on a retest of support-turned-resistance at the bottom of a Flag chart formation, hinting a move lower is ahead. Near-term support is at 26.75, with a break below that exposing the multi-month triple bottom at 26.05. Near-term resistance is now 28.29-61 area.

Commodities_to_Rise_if_Disappointing_US_Jobs_Data_Fuels_Stimulus_Bets_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.494 // -0.046 // -1.30%

Prices are testing back through support at 3.474, the intersection of a falling trend line set from late January and the 38.2% Fibonacci retracement level. Initial support lines up at 3.424, with a break below that exposing the 23.6% level at 3.384 and the major bottom at 3.250.

Commodities_to_Rise_if_Disappointing_US_Jobs_Data_Fuels_Stimulus_Bets_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