Talking Points

  • Crude Oil, Copper Aim Higher as Profit-Taking Drives Risk Recovery
  • Gold and Silver May Rebound on Waning Haven Demand for US Dollar

European shares are on the upswing and S&P 500 stock index futures are pointing higher, hinting risky assets are likely to remain supported as Wall Street comes online. This makes for a supportive environment for growth-geared crude oil and copper prices, where correlations with stock benchmarks remain significant. Meanwhile, gold and silver have scope to rebound as a pick-up in sentiment drains haven demand for the US Dollar.

With the EU leaders' summit done and the latest batch of PMIs from China and the Eurozone underscoring the seriousness of headwinds facing global output, the supply of near-term negativity that can conceivably strike the markets is running dry. Put simply, while there are ample reasons to be generally short risky assets, it may no longer appear attractive to get shorter at current levels. This opens the door for profit-taking to spark a corrective upswing until the bears return in force ahead of the repeat Greek election in mid-June.

The economic calendar is quiet in European hours, shifting the spotlight to the revised University of Michigan gauge of US Consumer Confidence as the next significant bit of event risk. Expectations call for confirmation of the originally reported outcome of 77.8, the highest reading since January 2008. After a second week of mixed May survey results, the outcome could prove to tip the scales in shaping traders' perception of the US recovery and its ability to mitigate Europe- and Asia-driven downward pressure on global growth.

WTI Crude Oil (NY Close): $90.66 // +0.76 // +0.85%

Prices put in a Harami candlestick pattern above resistance-turned-support at 90.49, hinting a corrective bounce may be ahead. Positive RSI divergence reinforces the case for an upside scenario. Initial resistance lines up at 92.51, a former support marked by the December 16 low, with a push above that targeting the February 2 low at 95.41.

Crude_Oil_Gold_May_Rise_as_Risk-Linked_Assets_Correct_Higher_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1559.25 // -2.20 // -0.14%

Prices narrowly slipped below support at 1560.98, the 23.6% Fibonacci retracement, exposing the next key downside barrier in the 1522.50-1532.45 region. The lack of meaningful conviction on the break lower puts follow-through into question however, suggesting the 38.2% Fib at 1582.10 may still be the most significant near-term resistance threshold.

Crude_Oil_Gold_May_Rise_as_Risk-Linked_Assets_Correct_Higher_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.30 // +0.50 // +1.80%

Prices are recovering from support at 27.06 after putting in a Bullish Engulfing candlestick pattern to aim at resistance at 28.70. A break above this level initially exposes 29.71. Alternatively, a reversal through support exposes the 26.05-15 area.

Crude_Oil_Gold_May_Rise_as_Risk-Linked_Assets_Correct_Higher_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.428 // +0.032 // +0.94%

Prices are mounting an intraday recovery from support at 3.438, the 100%Fibonacci expansion. Negative RSI divergence reinforces the case for an upside scenario. Initial resistance lines up at 3.537, the 76.4% expansion level. Alternatively, a break below support exposes the 123.6% level at 3.327.

Crude_Oil_Gold_May_Rise_as_Risk-Linked_Assets_Correct_Higher_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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