Commodity Prices Sink on Global Slowdown Fears, US Data Key Ahead

   on June 01 2012 8:18 AM

Talking Points

  • Crude Oil, Copper Sink as Chinese, European PMIs Sink Risk Appetite
  • Gold and Silver Under Pressure as US Dollar Hits Fresh 18-Month Highs
  • All Eyes on US Jobs, ISM Data on Hopes US Can Offset Global Headwinds

Commodity prices are pushing sharply lower as risk aversion grips financial markets anew into the end of the trading week. Growth-geared crude oil and copper prices are following stocks lower while anti-fiat gold and silver are under pressure as safe-haven demand pushes the US Dollar to fresh 18-month highs. The selloff follows a disappointing set of manufacturing PMIs from China, the UK and Switzerland. Final revisions of Eurozone PMI readings were nudged marginally higher but continued to firmly point toward contraction in manufacturing activity.

S&P 500 stock index futures are pointing sharply lower ahead of the opening bell on Wall Street, warning the selloff is likely to continue through the week-end, but an approaching round of headline US event risk may yet prompt a sentiment shift. The monthly US Employment report is expected to show the economy added 150k jobs in May, marking a narrow improvement from April's 115k result. In a rare scheduling change, the ISM Manufacturing is also due to cross the wires, but forecasts here point to a softer print. Traders will look to the results to establish near-term expectations for the likelihood that a firmer recovery in the US will (at least to some extent) offset headwinds to global output from Europe and Asia.

WTI Crude Oil (NY Close): $86.53 // -1.29 // -1.47%

Unchanged from yesterday: Prices broke through support in the 90.14-88.54 region marked by the early September swing top and the 61.8% Fibonacci retracement. Sellers now aim to challenge the 76.4% level at 83.34. The 90.14-88.54 area has been recast as near-term resistance.

Commodity_Prices_Sink_on_Global_Slowdown_Fears_US_Data_Key_Ahead_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1560.43 // -2.95 // -0.19%

Prices continue to consolidate above support in the 1522.50-1532.45 area. The outlines of a Descending Triangle are beginning to emerge, hinting at forthcoming bearish continuation. Confirmation on a break below support would expose a measured downside objective at 1445.95. Near-term trend line resistance lines up at 1596.90 and 1584.82. A break above the latter level exposes the 1600/oz figure.

Commodity_Prices_Sink_on_Global_Slowdown_Fears_US_Data_Key_Ahead_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $27.70 // -0.20 // -0.72%

Prices are drifting sideways above support at 27.06, with gains still capped at 28.70. A break lower initially exposes the 26.05-15 area. Alternatively, a push higher through resistance opens the door for a challenge of 29.71.

Commodity_Prices_Sink_on_Global_Slowdown_Fears_US_Data_Key_Ahead_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.366 // -0.024 // -0.71%

Prices broke through support at 3.373, the 38.2% Fibonacci expansion, with sellers now testing the 50% level at 3.323. A break below this boundary exposes the 61.8% Fib at 3.274. The 3.373 level has been recast as resistance.

Commodity_Prices_Sink_on_Global_Slowdown_Fears_US_Data_Key_Ahead_body_Picture_6.png,

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

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