Crude oil prices are vulnerable as risk aversion grips financial
markets anew while gold may find support as traders rethink the
chances of an early end to Fed stimulus.
Talking Points
- Crude Oil and Copper Vulnerable as "Fiscal Cliff" Deal
Optimism Dissipates
- Gold, Silver May Find Support as Traders Rethink Early End to
Fed Stimulus
Cycle-sensitive crude oil and copper prices are under pressure
in European trade with risk appetite on the defensive to start the
trading week. A short lull in big-ticket event risk this week opens
the door for investors to digest last week's volatility. On the
docket to be reconsidered are the last-minute deal avoiding the "
fiscal cliff " and December's FOMC meeting minutes.
The former may not prove to be as risk-supportive as the initial
reaction suggested . T he US tax environment is now relatively more
adverse from a growth perspective compared with the past two years.
Furthermore, fears of growing headwinds from US austerity may
emerge as spending cuts enter the equation amid legislative battles
surrounding the "debt ceiling" and the "sequester" cuts due to
trigger in two months.
On balance, this suggests the path of least resistance favors
risk aversion, hinting crude oil and copper may follow stocks lower
over the near term. Indeed, S&P 500 index futures are ticking
lower ahead of the opening bell on Wall Street.
Meanwhile, precious metals may find a bit of support as fears
about an early end to Federal Reserve stimulus moderate. Investors
seemed surprised after minutes from December's policy sit-down
hinted that the adoption of the "Evans rule" may bring about
normalization faster than previously expected. However, even a very
optimistic scenario where the Fed stops assets purchases by
mid-year would see the balance sheet expand by a hefty $0.5
trillion. With that in mind, inflation-hedge assets including gold
and silver may reclaim some lost ground as this realization filters
into the markets.
WTI Crude Oil (NY Close): $93.09 // +0.17 // +0.18%
Prices put in a Hanging Man candlestick below resistance at
93.25, the 100% Fibonacci expansion, hinting a move lower is ahead.
Near-term support is in the 91.23-92.01 area, marked by the 61.8%
and 76.4% Fibs respectively. This barrier is reinforced by the
formerly broken top of a rising channel top set from early
November. A drop below 91.23 exposes the 90.00 figure.
Alternatively, a reversal above 93.25 aims for the 123.6% expansion
at 94.51.
Daily Chart - Created Using FXCM Marketscope 2.0
Spot Gold (NY Close): $16 55 . 6 5 // - 8 . 30 // - 0 . 50 %
Prices reversed lower from resistance at a falling trend line
set from late November to test support at the 38.2% Fibonacci
expansion (1649.37). A break below this boundary exposes the 50%
level at 1635.24. Near-term resistance is at 1666.86, the 23.6%
Fib, with turn back above that eyeing the trend line (now at
1685.77) anew.
Daily Chart - Created Using FXCM Marketscope 2.0
Want to learn more about RSI?
Watch this Video
Spot Silver (NY Close): $30.21 // +0.04 // +0.13%
Prices reversed sharply lower from support-turned-resistance at
the bottom of a falling channel set from late November (31.21),
with sellers now testing the 38.2% Fibonacci expansion at 29.64. A
break below that targets the 50% level at 29.07. Near-term
resistance is at 30.33, 23.6% Fib.
Daily Chart - Created Using FXCM Marketscope 2.0
Want to learn more about RSI?
Watch this Video
COMEX E-Mini Copper (NY Close) : $3. 694 // -0.0 24 // -0. 65
%
Prices are testing below support at 3.680, the 50% Fibonacci
expansion. A break below that targets the 38.2% level at 3.643.
Near-term resistance is at 3.718, marked by the 61.8% expansion,
with a reversal above that aiming for the 76.4% Fib at 3.764.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for
Dailyfx.com
To contact Ilya , e-mail ispivak@dailyfx.com . Follow Ilya on
Twitter at
@IlyaSpivak
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