Talking Points

  •  Crude Oil On the Defensive Ahead of US Jobs Report
  •  Gold Trading as Safe Haven For Now, Outlook Clouded

WTI Crude Oil (NY Close): $88.93 // +0.12 // +0.14%

Needless to say, all eyes are pointed squarely at the US employment report, with expectations calling for the world's top economy will add 68,000 jobs in August to mark a slowdown from the previous month. Evaluating the possible scenarios for the announcement's impact on risk appetite (and thereby crude prices) is not a straight-forward endeavor after the minutes from the Federal Reserve's August policy meeting rekindled hopes for additional stimulus to be unveiled later this month. This means a counter-intuitive response whereby the WTI contract follows shares higher on a dismal outcome that is seen as boosting the chances of further easing and vice versa is a possibility.

With that in mind, trading volumes have withered substantially since the beginning of August and the proximity of a three-day weekend for Wall Street (with trading closed for the Labor Day holiday on Monday) will only compound thinning liquidity conditions. This means the door is open for an erratic reaction, seemingly leaving volatility as the only aspect of post-release price action that can be forecast with confidence.

The technical landscape is little changed from yesterday after prices put in a second Doji candlestick below support-turned-resistance at $89.59, the June 27 wick low, pointing to indecision and hinting bullish momentum may be fading. A reversal lower from here sees initial support at a rising trend line set from the August 9 swing low, now at $84.20. Alternatively, a break higher sees resistance at a multi-month channel top established from early May ($92.35).

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Spot Gold (NY Close): 1826.15 // +0.42 // +0.02%

Gold prices are pushing higher in European hours while S&P 500 stock index futures pull back ahead of the US jobs report, hinting the metal is playing to its safe-haven attributes and painting a picture of relatively straight-forward risk aversion. That may change very quickly however if a particularly weak payrolls reading cements Fed stimulus expectations, sending shares higher along with the yellow metal. As it stands, asking for follow-through and consistency in the current environment is a tall order and traders shall have to wait for the report to cross the wires before drawing any firm conclusions.

The technical picture is broadly unchanged from yesterday: prices appear to be forming a bearish Head and Shoulders top below the $1900/oz figure. The setup requires confirmation on a break the formation's would-be neckline at $1732.54 and would expose a measured target at $1553.18. Near-term support lines up at $1808.22, with a break below that exposing $1788.09. Initial resistance stands at $1840.75.

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Spot Silver (NY Close): $41.57 // +0.01 // +0.02%

As with gold, silver is moving as a safe haven ahead of the US jobs report as financial markets turn defensive, but the metal's reaction after the data crosses the wires is no less clouded than that of its more expensive counterpart. On the technical front, consolidation continues above Andrew's Pitchfork support ($39.61) and its midline ($42.40). A Bearish Engulfing candlestick pattern formed below the $44.00 figure argues for a broadly bearish bias over the medium term. A break below support exposes the $37.53, the August 9 closing low. Alternatively, a break higher targets the Engulfing high at $44.18, followed by the pitchfork top at $45.18.

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