Talking Points

  •  Crude Oil, Copper Under Pressure as Risk Appetite Unravels to Start Week
  •  Gold, Silver Sold as US Dollar Recovers on Returning Safe-Haven Demand

The emergence of risk aversion at the start of the trading week is broadly weighing on commodity prices. A refusal to boost IMF resources at the G20 finance ministers' summit over the weekend, the sharp run-up in oil prices, and anxiety ahead of a week heavy with event risk (including the second ECB LTRO, testimony from Fed Chairman Ben Bernanke, and the EU leaders' summit) are all contributing to the dour mood. Cycle-sensitive copper and crude oil prices are following stocks lower while a pickup in safe-haven flows into the US Dollar is weighing on gold and silver.

Looking ahead, S&P 500 stock index futures are pointing sharply lower to suggest the blood-letting is likely to continue as Wall Street comes online. With that in mind, the US economic calendar may offer a counterbalance to bearish sentiment. US Pending Home Sales are expected to bounce in January after falling the most in three months in December while the Dallas Fed's Manufacturing Activity gauge is forecast to hit a one-year high. Greek bailout implementation is likewise in the spotlight, with traders eyeing a German Bundestag vote on the package's terms due today.

WTI Crude Oil (NY Close): $109.77 // +1.94 // +1.80%

Prices are testing 61.8% Fibonacci extension resistance at 110.04, with a break higher exposing the 76.4% level at 114.25. Near-term support lines up at 106.70, the 50% Fib extension. As we noted last week however, RSI studies are at their most overbought since April (the last time Iran-linked jitters inflated crude prices). That was followed by a sharp decline in May, so the threat of a reversal may be rising.

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Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1772.45 // -8.23 // -0.46%

Prices continue to consolidate having taken out resistance at 1763.00, the December 2 high that closely coincides with the 23.6% Fibonacci extension level. Near-term resistance lines up at the 1800/oz figure and is reinforced by the 38.2% Fib. A break higher exposes the 50% level at 1825.68, while a reversal through support targets 1705.35.

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Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $35.40 // +0.05 // +0.15%

Prices put in a Shooting Star candlestick below resistance at 35.66, the October 28 swing high reinforced by the 38.2% Fibonacci extension level, hinting a pullback may be ahead. Initial support lines up at 34.37, the February 2 top. Alternatively, a daily close above resistance exposes 36.99, the August 9 low bolstered by the 50% extension.

Crude_Oil_Metals_Prices_Vulnerable_as_Risk_Appetite_Unravels_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.870 // +0.056 // +1.47%

Prices remain wedged between support at 3.789 and resistance at 3.909, a barrier reinforced by a rising trend line set from mid-December. A Bearish Engulfing candlestick pattern continues to argue for a broadly bearish bias, with a daily close above the February 9 high at 3.988 needed to neutralize the setup.

Crude_Oil_Metals_Prices_Vulnerable_as_Risk_Appetite_Unravels_body_Picture_6.png,

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com