Crude oil and gold prices are looking to comments from St. Louis Fed President James Bullard to guide expectations of a cutback in the Fed’s QE efforts.
Talking Points
Commodities Tread Water as Markets Weigh US, Chinese Economic Data
Crude Oil, Gold Look to Fed-Speak to Guide QE3 Taper Expectations
Commodities are treading water in European trade as investors weigh seemingly supportive cues from Friday’s US jobs report – where a better-than-expected print dented fears of an imminent reduction in Fed stimulus efforts – and disappointing Chinese economic data released over the weekend. Beijing reported that exports grew just 1 percent year-on-year in May, marking the smallest increase in 10 months. Separately, Industrial production growth unexpectedly slowed and new Yuan loans tumbled to a three-month low.
A lackluster economic calendar through the rest of the day hints “Fed-speak” may ultimately tip the scales to yield near-term direction cues. James Bullard, President of the US central bank’s St. Louis branch, is scheduled to take to the wires. Mr. Bullard is a voting member of the FOMC and traders will want to see if his remarks offer any guidance on a possible reduction in the size of QE3 asset purchases in the coming meetings of the policy-setting committee. Rhetoric advancing the case for a cutback in the pace of easing will probably weigh on cycle-sensitive crude oil and copper prices as well as reduce anti-fiat demand for gold and silver (and vice versa).
Crude Oil Technical Analysis (WTI)- Prices broke above resistance at 95.71, the 38.2% Fibonacci expansion, exposing the 96.72-97.09 area marked by the 50% level and a falling trend line established from mid-September 2012. A break above that targets the 61.8% Fib at 98.47. The 95.71 level has been recast as near-term support, with a move back beneath that eyeing the 23.6% expansion at 94.00.
Daily Chart – Created Using FXCM Marketscope 2.0
Gold Technical Analysis (Spot)- Prices moved lower as expected, taking out rising channel to challenge an upward-sloping trend line set from the April 16 low (now at 1379.23). A break below that initially eyes the 38.2% Fibonacci expansion at 1366.43. Channel support-turned-resistance is at 1400.54, with a move above that exposing the 50% Fib expansion at 1413.03.
Daily Chart – Created Using FXCM Marketscope 2.0
Silver Technical Analysis (Spot)- Prices finally broke out of consolidating, taking out support at the 38.2% Fibonacci retracement (22.03) to expose the 50% level at 21.17. A further push beneath that aims for the 61.8% Fib at 20.31. Alternatively, a move back above 22.03 aims for the 23.6% expansion at 23.10.
Daily Chart – Created Using FXCM Marketscope 2.0
Copper Technical Analysis (COMEX E-Mini)- Prices are testing below support at 3.241, the 23.6% Fibonacci expansion, after putting in a bearish Evening Star candlestick pattern. A break downward targets the 38.2% level at 3.132. Near-term resistance is at 3.398, the May 8 high.
Daily Chart – Created Using FXCM Marketscope 2.0
— Written by Ilya Spivak, Currency Strategist for Dailyfx.com
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Source: Daily fx