Talking Points

  •  Crude Oil Sinks as Prices Refocus on EU-Driven Risk Aversion
  •  Gold Still Following Dollar's Lead but Fed-Speak Also in Focus

WTI Crude Oil (NY Close): $98.82 // -3.77 // -3.67%

Yesterday's one-off push above the $100/barrel figure after Canada's Enbridge Inc said it will begin to pump inventory out of the Cushing, Oklahoma delivery point didn't prove lasting, with risk trends swiftly taking over anew and sinking the WTI contract as EU-centered sovereign stress continues to weigh on sentiment.

Looking ahead, all eyes are on commentary from ECB President Mario Draghi and German Bundesbank President Jens Weidmann, with traders looking for guidance on the evolution of the central bank's position on taking up the role of a true lender of last resort for the Eurozone. Any indication that the ECB is inching closer toward a more aggressive support role would naturally prove supportive for risk appetite and encourage crude oil higher. Alternatively, a clear message ruling out more forceful actions from the central bank or hints that the subject is fanning the flames of dissent among officials is likely to have the opposite effect.

Turning to the chart setup, prices completed a well-defined Bearish Engulfing candlestick pattern, hinting bearish reversal is ahead. Overbought RSI studies reinforce the case for a downside scenario. A break below rising trend line support now at 98.18 is needed to confirm, exposing the 50% Fibonacci retracement at 94.87. Near-term resistance stands at 103.65.

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Spot Gold (NY Close): $1721.78 // -41.60 // -2.36%

Gold prices continue to take their cues from the US Dollar, with the greenback's advance amid safe-haven buying weighing heavily on the yellow metal. As with oil, the focus is on ECB commentary through the end of the week as EU-driven risk sentiment trends continue to guide the trajectory of the greenback, although commentary from the Fed's Bill Dudley, Richard Fisher, and John Williams may prove market if hints of QE3 were to emerge, renewing gold's appeal as an inflation hedge.

On the technical front, pricesfollowed yesterday's rising channel support break with a push through the 38.2% Fibonacci retracement level at 1746.26, exposing the 50% barrier at 1695.05. A break below this boundary exposes 1606.80. The 38.2% Fib has been recast as near-term resistance.

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Spot Silver (NY Close): $31.72 // -2.03 // -6.02%

Like gold, the trajectory of the US Dollar remains the critical driver for silver prices. Having held to a range since late October, a breakout finally materialized as the metal dropped through support at the $33.00 figure to meet the 23.6% Fibonacci extension level at 31.39. Continued selling from here exposes the 38.2% Fib at 28.74. The 23.6% barrier has been recast as near-term support.

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