Talking Points

  •  Crude Oil, Copper Higher Ahead of US Existing Home Sales Report
  •  Gold and Silver at Risk as US Data Weighs on QE3 Bets, Boosts Dollar

Commodity prices are showing mixed results in European trade but S&P 500 index futures point firmly higher, hinting risk appetite is likely to be well-supported heading into the afternoon as Wall Street comes online. Optimism seems to reflect hopeful expectations ahead of US Existing Home Sales figures, where forecasts point to the highest reading in 22 months at 4.61 million.

With the Eurozone widely expected to be in recession already and worries about a slowdown in China at the forefront again after the country raised fuel prices yesterday, the US stands as the sole remaining major engine of global output expected to see a pickup in performance this year. This means US economic data has taken on addedmarket-wide significance.

A strong print is likely to prove supportive for growth-sensitive copper and crude oil prices, although the WTI contract will also have to contend with the official DOE set of weekly inventory figures. Yesterday's preliminary API report showed a drop in stockpiles, but investors overlooked it amid broad-based risk aversion. A similar outcome this time around may have more market-moving potential considering forecasts call for an increase.

Importantly, housing data carries a degree of added significance considering the depressed property market is at the top of the Fed's list of concerns (along with unemployment, which has shown notable improvement lately). This suggests stronger outcomes here likely to encourage policymakers as they begin to tip-toe away from ultra-dovish territory.

As we observed last week, this new-found responsiveness of Fed policy to the apparently firming recovery has produced an environment where the heretofore rigidly safe-haven US Dollar is able to rise along with share prices. This coupled with reduced QE3 expectations implicit in strengthening economic news is likely to weigh on gold and silver prices.

WTI Crude Oil (NY Close): $108.09 // +1.03 // +0.96%

Prices put in a Bearish Engulfing candlestick below resistance at 108.32, the 14.6% Fibonacci retracement. It is unclear at this point whether the move markets a bearish reversal or merely a correction to retest recently broken Falling Wedge top resistance. A break of the next layer of support at 104.75 marked by the 38.2% Fib would act as confirmation.


Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1664.52 // +4.52 // +0.27%

Prices continue to carve out a Falling Wedge bullish reversal chart formation, with a Harami candlestick pattern above support at 1638.84 reinforcing the likelihood of a bounce. Initial resistance lines up in the 1666.37-1677.05 area, with a break above that validating the Wedge setup and exposing resistance barriers at the 1700/oz figure as well as 1718.05.


Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $32.95 // +0.42 // +1.30%

Prices continue to stall having completed a Head and Shoulders top chart pattern with a break below the formation's neckline at 32.97, the 38.2% Fibonacci retracement level. Initial support remains at 31.67, the 50% Fib, with a break lower exposing the 61.8% retracement at 30.37. The H&S setup implies a measured downside objective at 26.84, which closely coincides with the late December bottom. The 38.2% level has been recast as near-term resistance.


Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.910 // +0.032 // +0.83%

Prices continue to consolidate below falling trend line resistance connecting major highs since early February. Initial support lines up at 3.808, the 23.6% Fibonacci retracement, with a break below that exposing the 3.696-3.713 area anew. Trend line resistance is now at 3.913, with a break above exposing 3.988.


Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for