Commodities appear vulnerable as markets turn their attention to the US jobs report, with leading indicators warning the payrolls print may fall short of expectations.

Talking Points

  • Crude Oil, Copper May Follow Stocks Lower on Soft US Employment Data

  • Gold and Silver Could Face Selling Pressure if Jobs Report Boosts US Dollar

All eyes are on the US Employment report in the final hours of the trading week. Expectations point to 115,000 increase in payrolls in September, marking a slight improvement following the previous month’s disappointing 96,000 gain. A slowdown in service-sector hiring revealed in September’s ISM data opens the door for a disappointment. On the other hand, yesterday’s jobs data from ADP points to a pickup, although that gauge has tended to overstate jobs gains since February so its forecasting potential seems suspect.

Economists’ forecasts continue to point toward a narrow acceleration in US economic growth compared with a slowdown in Asia and outright recession in the Europe this year. That means investors are likely looking to North America for an offset of headwinds elsewhere. With that in mind, a soft payrolls print is likely to weigh on risk appetite, putting pressure on sentiment-geared crude oil and copper prices. Gold and silver may likewise decline if the outcome proves to spark haven demand for the US Dollar. Needless to say, a better-than-expected reading stands to produce the opposite results.

WTI Crude Oil (NY Close): $91.71 // +3.57 // +4.05%

Prices reversed sharply higher having found support at 87.70, the 38.2% Fibonacci expansion. The bulls now aim to challenge the 23.6% level at 92.56. A push above that exposes the underside of a rising channel set from early July, now at 96.83. Alternatively, a reversal through support targets the 50% expansion at 83.76.

Commodities_Vulnerable_as_All_Eyes_Turn_to_US_Jobs_Report_body_Picture_3.png, Commodities Vulnerable as All Eyes Turn to US Jobs Report

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1790.40 // +12.40 // +0.70%

Prices are testing resistance in the 1790.55-1802.80 area marked by the November 2011 and February 2012 swing highs. A break higher exposes 1850.00 and the 1900.00 figure. Initial support stands at a rising trend line set from mid-August, now at 1772.27. A reversal below that targets major trend line resistance-turned-support at 1746.79.

Commodities_Vulnerable_as_All_Eyes_Turn_to_US_Jobs_Report_body_Picture_4.png, Commodities Vulnerable as All Eyes Turn to US Jobs Report

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $35.01 // +0.41 // +1.19%

Prices narrowly took out resistance at 34.80, the 76.4%Fibonacci retracement. The bulls now aim to challenge 36.89, the February 28 closing high. Initial trend line support stands at 34.43. A break below that targets the 32.93-33.14 area, marked by a horizontal pivot level and the 61.8% Fib.

Commodities_Vulnerable_as_All_Eyes_Turn_to_US_Jobs_Report_body_Picture_5.png, Commodities Vulnerable as All Eyes Turn to US Jobs Report

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.786 // +0.002 // +0.05%

Prices continue to consolidate below resistance at a falling trend line set from early February (3.823). 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 level. A push below that targets the 38.2% level at 3.627.

Commodities_Vulnerable_as_All_Eyes_Turn_to_US_Jobs_Report_body_Picture_6.png, Commodities Vulnerable as All Eyes Turn to US Jobs Report

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

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