Talking Points

  • Crude Oil, Copper at Risk as Greek Election Fears Weigh on Sentiment
  • Gold and Silver May Hold Support Even as US Dollar Regains Haven Bid

Commodity prices are trading marginally higher in early European trade but risk appetite seems fragile as the weekend's Greek election draws closer. Traders are likely to turn defensive amid fears that a vote against bailout-friendly parties will lead Greece out of the Eurozone. This stands to weigh on sentiment-linked crude oil and copper prices.

While risk aversion stands to reboot capital inflows in the US Dollar, gold and silver appear likely to remain supported for the time being. Besides fears of runaway inflation, investment interest in precious metals can be expected to increase when traders credibly fear a market-wide dislocation so significant as to broadly disrupt price discovery for non-physical assets. A disorderly Greek exit from the Eurozone may amount to just such an event, meaning gold and silver demand ought to hold up into the weekend.

US CPI figures are in focus on the economic calendar, though the outcome seems unlikely to generate fireworks considering its limited implications for Fed QE3 bets after last week's Ben Bernanke testimony poured cold water on hopes for added stimulus. The annual pace of price growth is forecast to slow to 1.8 percent in May compared with 2.3 percent in the prior month.

WTI Crude Oil (NY Close): $82.62 // -0.70 // -0.84%

Prices put in a bullish Piercing Line candlestick pattern above support at 81.07, the 23.6% Fibonacci expansion, hinting a bounce may be ahead. Positive RSI divergence reinforces the case for an upside scenario. Initial resistance lines up at 83.30, the 14.6% Fib, with a break higher exposing the June 7 high at the 87.00 figure. Alternatively, a break past support targets the 38.2% level at 77.33.

Crude_Oil_at_Risk_but_Gold_Well-Supported_Before_Key_Greek_Election_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1617.05 // +7.25 // +0.45%

Prices are testing resistance at 1616.23, the intersection of the 61.8% Fibonacci retracement and a falling trend line set from early March. A break above this boundary exposes the 76.4% Fib at 1637.35. The 1600/oz figure is acting as near-term support, with added reinforcement coming in from the 50% retracement at 1599.17.

Crude_Oil_at_Risk_but_Gold_Well-Supported_Before_Key_Greek_Election_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.82 // -0.15 // -0.52%

Prices broke above resistance at 28.70, exposing 29.71 as the next upside barrier. With that in mind, the overall structure appears to be showing a Flag chart formation, a setup indicative of bearish continuation. Confirmation is required on a daily close below the pattern's bottom - now at 28.19 - which would expose 27.06 as the next downside objective.

Crude_Oil_at_Risk_but_Gold_Well-Supported_Before_Key_Greek_Election_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.340 // +0.004 // +0.12%

Prices are treading water after taking out the top of a falling channel set from the May 1 swing high. Near-term resistance lines up at 3.384, the 23.6% Fibonacci retracement. A break above this boundary targets the 38.2% Fib at 3.474. Double bottom support comes in at 3.250.

Crude_Oil_at_Risk_but_Gold_Well-Supported_Before_Key_Greek_Election_body_Picture_6.png,

Daily Chart - Created Using FXCM Marketscope 2.0

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

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