Talking Points

  •  Crude Oil and Copper Look to US Data, Fed Comments to Extend Advance
  •  Gold and Silver May Reverse Lower if QE3 Expectations Appear Overdone

Commodity prices rose yesterday after Federal Reserve Chairman Ben Bernanke said accommodative monetary policy was needed to stoke improvement in the labor market, which the markets interpreted to signal that a third round of quantitative easing (QE3) was still in the cards. A lackluster set of US economic data offered a fitting backdrop for the Fed chief's comments. Growth-sensitive crude oil and copper prices followed stocks higher on hopes additional stimulus will accelerate the still patchy recovery while gold and silver rose as the prospect of renewed dilution of the US Dollar stoked store-of-value demand.

Looking ahead, the stage appears set for a repeat performance. The Conference Board's measure of US consumer confidence and Richmond Fed manufacturing activity gauge are forecast to show moderation in March while the Fed speaking docket features NY Fed President Bill Dudley and Governor Elizabeth Duke, both of whom tend to fall on the dovish side of the spectrum. S&P 500 stock index futures warn against jumping to conclusions too soon however, trading conspicuously flat ahead of the opening bell on Wall Street and hinting that investors remain uneasy about showing directional commitment to Monday's moves.

On balance, the markets investors may not be quite as sold on the prospects for QE3 as yesterday price action would suggest. Indeed, Bernanke's mention of accommodative monetary policy need not have referred to asset purchases at all and may have been aimed at the pledge to keep rates low through late 2014. This leaves the door open for a correction as yesterday's moves begin to appear overdone upon closer examination unless the US calendar is able to meaningfully advance the argument for additional stimulus beyond where it was left at Monday's close of North American exchanges.

WTI Crude Oil (NY Close): $107.03 // +0.16 // +0.15%

Prices put in a bullish Piercing Line candlestick above support at 104.75, the 38.2% Fibonacci retracement, hinting a move higher is ahead. Initial falling trend line resistance lines up at 108.04, with a break upward initially exposing the March 19 swing high at 108.66.

Crude_Oil_Metals_Looking_for_Fed_Stimulus_Hopes_to_Extend_Gains_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1690.07 // +28.17 // +1.70%

Prices broke through resistance at 1666.37 to challenge the 23.6% Fibonacci expansion at 1691.06. A break above this boundary exposes the February 6 close at 1719.76 followed by the 38.2% Fib at 1730.38. The 1666.37 level has been recast as near-term support.

Crude_Oil_Metals_Looking_for_Fed_Stimulus_Hopes_to_Extend_Gains_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $32.82 // +0.60 // +1.89%

Prices completed a bullish Three Outside Up candlestick pattern above support at 31.67, the 50% Fibonacci retracement level, warning of an upward reversal ahead. The bulls now challenge the 38.2% Fib at 32.97, with a daily close above this barrier invalidating a Head and Shoulders top carved out between late January and mid-March to expose the 23.6% level at 37.59.

Crude_Oil_Metals_Looking_for_Fed_Stimulus_Hopes_to_Extend_Gains_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.888 // +0.080 // +2.10%

Prices appear to be forming a Triangle chart pattern above support at 3.696, the 38.2% Fibonacci retracement level. The setup warns of bullish continuation ahead, although confirmation is needed on a daily close above the Triangle's top (now at 3.902). Near-term support lines up at 3.762, the formation's lower boundary.

Crude_Oil_Metals_Looking_for_Fed_Stimulus_Hopes_to_Extend_Gains_body_Picture_6.png,

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