Talking Points

  •  Crude Oil Facing Selling Pressure as Greece Fuels Risk Aversion Anew
  •  Gold Outlook Hinges on US Dollar's Response to Sentiment Trends

WTI Crude Oil (NY Close): $93.19 // -0.13 // -0.14%

Crude oil prices are set to move lower as S&P 500 stock index futures tick aggressively lower ahead of the opening bell on Wall Street, pointing to a second day of losses for risky assets. The selloff follows news that Greek Prime Minister George Papandreou will put the new EU debt crisis containment plan announced last week to a national referendum, with pessimism compounded by a sharp slowdown in Chinese factory-sector activity reported overnight.

All eyes are now pointing to the US ISM Manufacturing report, with expectations calling for growth to accelerate for the second consecutive month in October. While the release falls broadly in line with the cautious improvement in US economic data since the beginning of June, traders will be keen to gauge the market's response as a barometer for investors' interpretation of positive growth cues out of the world's top economy. On one hand, the result can be interpreted as supportive for risky assets in that a stronger US is good news for the global recovery at large. On the other, it can be seen as risk-negative in that it argues against the likelihood of a QE3 stimulus program from the Federal Reserve ahead of the FOMC policy meeting due later in the week.

The technical landscape is broadly unchanged from yesterday. Similar to the S&P 500, prices formed a Hanging Man candlestick below resistance at $94.87, the 50% Fibonacci retracement barrier. A selloff from here sees initial support at $90.17, the 38.2% Fib, with a break below that exposing $85.33 and $79.62.

Crude_Oil_Gold_Remain_Under_Pressure_as_US_Dollar_Pushes_Higher_body_Picture_3.png,

Spot Gold (NY Close): $1714.85 // -28.90 // -1.66%

As we discussed yesterday, gold prices slumped as the US Dollar mounted a dramatic recovery to start the trading week, amounting to de-facto downward pressure on the yellow metal. The aggressive overnight decline in S&P 500 stock index futures argues for more of the same as the greenback continues to benefit from safe-haven buying. As with crude oil however, much will depend on how the markets interpret the outcome of the US ISM Manufacturing reading vis-à-vis its implications for risk appetite and thereby, the trajectory of the US currency as well as QE3 expectations.

Sizing up the technical landscape, prices completed a bearish Evening Star candlestick pattern above the $1700 figure, the former range top established in late September. Confirmation of a larger reversal on a daily close below this boundary exposes the 23.6% Fibonacci extension at $1660.81. Near-term resistance is at $1745.15.

Crude_Oil_Gold_Remain_Under_Pressure_as_US_Dollar_Pushes_Higher_body_Picture_4.png,

Spot Silver (NY Close): $34.30 // -1.03 // -2.90%

As with gold, silver is edging lower on the back of the sharp rebound in the US Dollar, with the US ISM report lining up as the next major inflection point. A bearish Evening Star candlestick has been formed below resistance at $35.12, the 50% Fibonacci retracement, with prices turning lower toward support near the $33.00 figure (which coincides closely with the 38.2% retracement and 14.6% Fib extension). A break below exposes the 23.6% extension at $31.39

Crude_Oil_Gold_Remain_Under_Pressure_as_US_Dollar_Pushes_Higher_body_Picture_5.png,