Talking Points

  •  Crude Oil May Drift Higher on Year-End Flows But Resistance Looms
  •  Gold Technical Positioning Hints Prices on Pace to Challenge Key Support

WTI Crude Oil (NY Close): $99.68 // +0.15 // +0.15%

Crude oil prices may continue to drift higher as a supportive set of US economic data helps fuel a corrective rebound in risky assets on the back of year-end profit-taking. Expectations point to nominal improvements in the Consumer Confidence as well as the Richmond and Dallas Federal Reserves' measures of manufacturing activity (released independently of one another).Technical positioning is beginning to warn of a turn lower ahead however. Prices are testing the top of a falling channel set from the November 17 high, now squarely at the 100.00 figure, with a break higher targeting 101.39. Near-term support remains at 97.89. A candle in Star position hints preliminary signs of a bearish reversal may be emerging but confirmation is needed before anything can be said with confidence.

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Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1606.95 // +0.60 // +0.04%

As we discussed last week, a decline in gold ETF holdings points to eroding investment demand in the aftermath of December's FOMC policy meeting, putting the yellow metal under pressure. The near-term outlook is a bit clouded as seasonal profit-taking weighs on the US Dollar, offering gold a de-facto boost, but technical positioning seems to suggest the bearish side of the argument is holding way. Prices followed a bearish Shooting Star candlestick established following a retest of resistance at the bottom of a previously broken falling channel with a break through initial support at 1609.05. The bears now aim to challenge the long-term trend line dating back to late October 2008 at 1565.52. Near-term resistance is now at 1609.05 and reinforced by the channel bottom at 1615.53.

Crude_Oil_Recovery_May_Be_Cut_Short_Gold_to_Challenge_Trend_Support_body_Picture_4.png,
Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $29.11 // -0.01 // -0.04%

Little has changed from what we observed last week, with prices locked in a narrow range between 28.41 and 29.79. The fundamental catalysts driving price action largely mirror those of gold: eroding demand for an inflation hedge presents a headwind likely to develop over the coming months, but year-end profit-taking is weighing on the US Dollar and producing an uneasy standstill. A break higher exposes rising trend line support-turned-resistance at 32.07 while a push to the downside targets 26.05.

Crude_Oil_Recovery_May_Be_Cut_Short_Gold_to_Challenge_Trend_Support_body_Picture_5.png,
Daily Chart - Created Using FXCM Marketscope 2.0

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