Talking Points

  • Crude Oil, Copper May Rise as Firmer US Economic Data Underpins Risk Appetite
    Gold and Silver to Find Support in Risk-On Markets on Ebbing US Dollar Demand
    Euro Crisis Cues Sought as Merkel Meets with Draghi, Italy and Spain Sell Bonds

Commodities corrected narrowly higher overnight after yesterday’s broad-based selloff. The spotlight turns to September’s US Consumer Confidence reading and the Richmond Fed Manufacturing Index, with improvements expected on both fronts.

Consensus forecasts continue to suggest US growth will accelerate while Europe sinks into recession and Asia posts a meaningful slowdown this year. This means establishing the extent to which a firmer US recovery can offset headwinds elsewhere is formative for risk appetite.

US data has increasingly outperformed expectations over recent weeks (according to data compiled by Citigroup). More of the same this time around may underpin risk appetite trends, driving the growth-geared crude oil and copper prices higher while offering a de-facto lift to gold and silver on the back of ebbing haven demand for the US Dollar. Needless to say, a softer print has scope to produce the opposite result.

With that in mind, a better-than-forecast reading on yesterday’s Dallas Fed manufacturing gauge seemed to pass unnoticed, and follow-through could remain absent this time around as well. Separately, Philadelphia Fed President Charles Plosser will give a speech on the economic outlook and the API set of weekly crude inventory figures will come across the wires.

In the meantime, a lackluster European economic data docket will keep investors’ eyes on Eurozone debt crisis management efforts. A meeting between German Chancellor Angela Markel and ECB President Mario Draghi is likely to warrant particular attention. No press briefing is scheduled but traders will keep a close eye on any sideline commentary.

German and Dutch Finance Ministers Wolfgang Schaeuble and Jan Kees de Jager are also due to discuss the crisis with their perennially euro-skeptic Finnish counterpart Jutta Urpilainen. Finally, Spain and Italy are due to tap the bond markets. Madrid will sell 77- and 168-day bills while Rome offers up 2014 zero-coupon paper as well as 2016 and 2021 inflation-linked bonds. Investors will look to average yields and bid-to-cover readings for signs of funding stress.

WTI Crude Oil (NY Close): $91.93 // -0.96 // -1.03%

Prices are testing support at 91.56, the 38.2% Fibonacci retracement, after taking out the bottom of a rising channel carved out since early July. A break downward targets the 50% level at 88.83. The channel bottom – now at 95.08 – has been recast as resistance. A push back above that aims to challenge a falling trend line set from late February (now at 99.31).

Crude_Oil_Gold_May_Rise_if_Firm_US_Data_Stokes_Risk_Appetite_body_Picture_3.png, Crude Oil, Gold May Rise if Firm US Data Stokes Risk Appetite

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1764.45 // -8.65 // -0.49%

Prices continue to stall after taking out resistance at a falling trend line connecting major swing highs since early November 2011. Near-term resistance is at 1790.55, with a break above that targeting 1802.80. The trend line – now at 1756.93 – has been recast as support. A push back below that boundary sees initial downside barriers at 1725.87 and 1687.84, the 23.6% and 38.2% Fibonacci retracements respectively.

Crude_Oil_Gold_May_Rise_if_Firm_US_Data_Stokes_Risk_Appetite_body_Picture_4.png, Crude Oil, Gold May Rise if Firm US Data Stokes Risk Appetite

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $33.99 // -0.54 // -1.56%

Prices turned lower from resistance at 34.80, the 76.4%Fibonacci retracement. Initial support lines up in the 32.93-33.14 area, marked by a horizontal pivot level and the 61.8% Fib, with a break below this boundary exposing the 50% level at 31.79. Alternatively, a break above resistance aims to challenge 36.89.

Crude_Oil_Gold_May_Rise_if_Firm_US_Data_Stokes_Risk_Appetite_body_Picture_5.png, Crude Oil, Gold May Rise if Firm US Data Stokes Risk Appetite

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.732 // -0.058 // -1.53%

Prices continue to stall below resistance at a falling trend line set from early February (3.830). 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.

Crude_Oil_Gold_May_Rise_if_Firm_US_Data_Stokes_Risk_Appetite_body_Picture_6.png, Crude Oil, Gold May Rise if Firm US Data Stokes Risk Appetite

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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