Commodities - Energy

Crude Oil Focus Back on Middle East

WTI Crude Oil (NY Close): $101.73 // -$0.50 // -0.49%

Commentary: An increasingly close correlation with the VIX index of S&P 500 options volatility - investors' go-to fear gauge - suggests the turmoil in the Middle East is likely to remain in focus for oil prices. Indeed, crude fell today despite growth-supportive US economic news (a better-than-expected ADP employment report and a cautiously upbeat Fed Beige Book regional survey), with losses linked to an emerging Venezuelan mediation to broker a peace deal in Libya. It remains to be seen if this gains traction, so the pullback may have room yet to continue, but steady reports of clashes in the headlines as well as questionable credibility of mediation by Hugo Chavez - a long-time Qaddafi apologist - may see optimism fade rather quickly. The US data docket is relatively quiet, with the next major bit of scheduled event risk being Friday's US jobs report.

Technical Outlook: Sizing up long-term positioning, crude seems to have made a material brake higher having pierced the midline of the rising channel established from crisis lows in early 2009. From here, near-term resistance stands at last week's swing high ($103.41), with a break above that exposing a Fibonacci extension barrier at $104.64. The trend-defining channel top is now at $111.05.

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Commodities - Metals

Gold, Silver Prices Tracking Risk Trends

Spot Gold (NY Close): $1428.40 // -$6.10 // -0.43%

Commentary: As with oil, gold prices continue looking to the crisis in the Middle East as the primary driver of directional momentum. However, while crude may prove to yield a conflicted outcome should Friday's US employment data prove impressive, the yellow metal seems to be increasingly entrenched in its recently reclaimed role as a safety asset. Expectations call for an increase of 195k in overall nonfarm payrolls, the largest in eight months; should this materialize, a further pullback may be in store through the end of the week as risky assets continue to feed on the steady (if slow-moving) improvement in US data. The proposed mediation deal in Libya remains a wild-card however, and any major escalation following the likely failure of the proposal may overwhelm investors.

Technical Outlook: Prices appear to have stalled a bit after taking out triple top resistance at $1424.60, but only a daily close back below the level would somewhat defuse upward pressure. Otherwise, risks continue to be stacked on the upside, with a resumption of the advance initially targeting $1451.38.

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Spot Silver (NY Close): $34.52 // -$0.17 // -0.48%

Commentary: Silver prices have mirrored gold's response to the broad macro environment, taking their cues from trends risk sentiment. To that affect, a pullback and period of consolidation seems likely after the metal soared to new 30-year highs. However, geopolitical concerns remain an ever-present danger that could make for a very short lull in the advance.

Technical Outlook: Prices have taken out resistance at 34.22, the 161.8% Fibonacci extension of January's downswing, to challenge the 176.4% level at $34.93. A push through this barrier exposes the $36.00 figure, but negative RSI divergence hints bullish momentum has faded somewhat, hinting at the possibility of a pullback. The 161.8% Fib has been recast as near-term support, with a push through that targeting a rising trend line set from the lows in mid-January.

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