Commodities Rise as Risk Appetite Firms on China Funding Boost

Talking Points

• Crude Oil, Copper Aim Higher as Risk Appetite Firms on China Funding Boost
• Gold and Silver May Rise as Sentiment Gains Dent Haven Demand for US Dollar

Commodity prices are on the upswing as risk appetite firms across financial markets after Chinatook steps to boost its banks’ access to funding, injecting CNY220 billion into the system via 7- and 14-day reverse-repo operation. Investors treated the move as a form of monetary stimulus, with hopes that it will help underpin growth in the world’s second-largest economy bolstering risk-geared assets including crude oil and copper. Gold and silver advanced as the chipper mood soured haven demand for the US Dollar, offering de-facto support for the anti-fiat precious metals.

S&P 500 stock index futures are pointing cautiously higher ahead of the opening bell on Wall Street, hinting more of the same is likely as North American markets come online. The API set of preliminary weekly crude oil inventory figures amounts to the only bit of event risk on the US data calendar. Atlanta Federal Reserve President Dennis Lockhart is also scheduled to speak, with traders keeping an eye out for anything that can illuminate the balance of power between the pro- and anti-QE3 camps on the rate-setting FOMC committee.

WTI Crude Oil (NY Close): $95.97 // -0.04 // -0.04%

Prices broke resistance at 95.41, the February 2 low, opening the door for a challenge of the 61.8% Fibonacci retracement at 97.82. A break above that exposes the psychologically significant $100/barrel figure. The 95.41 level has been recast as support, with a drop back below that targeting the 50% Fib at 93.90.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1620.50 // +4.45 // +0.28%

Prices continue to drift below resistance in the 1620.45-35.70 congestion area. Near-term support remains at a rising trend line support set from late June, now at 1601.50. A break below this boundary exposes a longer-term trend line established from the May 16 bottom, currently at 1578.39. Alternatively, a push above resistance initially targets the major trend set from the August 23 2011 peak, now at 1665.45.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.79 // +0.70 // +2.50%

Prices took out resistance at 28.44, with the bulls now aiming to challenge the next upside barrier at 29.42. A push above this boundary exposes the 30.00 figure. The 28.44 level has been recast as near-term support, with a drop back below that targeting 27.68 anew.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.372 // -0.048 // -1.40%

Prices are testing resistance at a falling trend line set from the April 3 high, a barrier reinforced by a horizontal level at 3.435. A break higher initially targets 3.535. Alternatively, a reversal through near-term support at 3.354 exposes 3.300.

Daily Chart - Created Using FXCM Marketscope 2.0

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

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