Commodities Tracking Risk Trends, Spain Bond Sale and Earnings Key

Talking Points

•  Crude Oil, Copper Look to Spanish Bond Sale and Earnings Docket for Direction
•  Gold and Silver Maintain Anti-USD Status, May Rise in Risk-On Environment

Broad-based sentiment trends remain in control of commodity prices, with Eurozone debt crisis worries at the forefront today as markets await the outcome of a pair Spanish bond auctions. Madrid is due to sell 2014 and 2022 debt. Previous auctions of equivalent maturities drew average yields of 2.069 and 5.403 percent for 2-year and 10-year notes respectively. Readings north of these outcomes threaten to project returning funding stress in the currency bloc and threaten to weigh on risk appetite.

Later in the day, another helping of corporate earnings reports enters the spotlight, with names including Bank of America, Verizon and Microsoft on tap. Traders continue to look to look toward guidance from major cycle-sensitive companies to help shape expectations for the degree to which a pickup in the US can offset a slowdown in China and recession in the Eurozone this year.

Turning to the economic calendar, expectations call for a minor pullback in the Philadelphia Fed business confidence gauge in April while Existing Home Sales rise the most in five months while the composite Leading Indicators metric gains 0.2 percent to reach the highest level since June 2008. Weekly jobless claims numbers are expected to yield mixed results, with initial applications for benefits down while continuing ones advance.

On balance, crude oil and copper remain closely correlated with the S&P 500, hinting shares' response to the day's event risk will see direct reflection in prices for the growth-driven commodities. Meanwhile, gold and silver look to the US Dollar for direction cues. For its part, the greenback still shows a meaningful inverse relationship with stock prices, hinting a sentiment-supportive landscape is likely to weigh on the benchmark currency while bolstering precious metals (and vice-versa).

WTI Crude Oil (NY Close): $102.67 // -1.53 // -1.47%

Prices are testing resistance at 104.90 after putting in a Bullish Engulfing candlestick above rising trend line support set from mid-December. A break above this level exposes falling trend line barriers at 105.41 and 106.56. Support is now at 101.38.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1642.10 // -7.47 // -0.45%

Prices are testing support at 1638.02, the 23.6% Fibonacci expansion, after putting in a Bearish Engulfing candlestick pattern below falling trend line resistance set from early March. A break lower exposes the 38.2% level at 1612.02. Trend line resistance is now at 1669.50.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $31.63 // -0.05 // -0.16%

Prices continue to consolidate below resistance at 32.93, the former neckline of a Head and Shoulders (H&S) top carved out between late January and mid-March, and horizontal support at 31.04. A break blower exposes the first downside barrier at 29.79. The H&S setup broadly implies a measured downside target at 26.84.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.632 // -0.016 // -0.44%

Prices put in two back-to-back Hammer candlesticks above rising trend line support set from early October, hinting a move higher may be ahead. Initial resistance lines up at 3.716, the 38.2% Fibonacci retracement. A break above this barrier exposes the 50% level at 3.761. Trend line support is now at 3.627.

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