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Commodities Look to US Economic Data, Citigroup Earnings for Direction

By , Currency Strategist
15 October 2012 06:33 GMT

Commodity prices are looking toward the US economic data set and third-quarter results from Citigroup Inc to set a bearing on risk appetite and yield direction cues.

Talking Points

  • Commodities Under Pressure as US Dollar Pushes Higher in Overnight Trade
  • US Economic Data, Citigroup Q3 Earnings Take Center Stage in Hours Ahead

Commodity prices are moving lower overnight as the US Dollar pushes broadly higher, applying de-facto downward pressure to assets denominated in terms of the benchmark currency. While single catalyst for the advance is not readily apparent, a pickup in haven demand for the greenback seems reasonable as traders cast a worried eye toward the week ahead. The third-quarter corporate earnings reporting season gathers pace over the coming days – 84 members of the S&P 500 are due to release results – and traders appear increasingly concerned that companies’ guidance will point to a deepening slowdown in global growth.

Citigroup Inc headlines today’s earnings docket. The earnings of large financial institutions may prove particularly telling in revealing the discrete and overlapping implications of economic and financial vulnerabilities plaguing the global outlook. With that in mind, traders will be keen to see not how the third-largest US bank faired over the past three months and where it sees its fortunes heading from here. On the data front, the spotlight is on September’s US Retail Sales data and October’s Empire Manufacturing survey of New York State factory-sector activity. Positive outcomes are likely to prove supportive for risk appetite (and by extension for key commodities), buoying hopes that a firmer US recovery will help offset sluggish performance elsewhere, and vice versa.

WTI Crude Oil (NY Close): $91.86 // -0.21 // -0.23%

Prices are testing resistance at the would-be neckline of an inverse Head and Shoulders bottom (92.50), with a break higher implying a measured upside target at 97.96. Support stands at 87.66, the 38.2% Fibonacci retracement. A drop below that targets the 50% level at 83.76.

Commodities_Look_to_US_Economic_Data_Citigroup_Earnings_for_Direction_body_Picture_3.png, Commodities Look to US Economic Data, Citigroup Earnings for Direction

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1754.48 // -12.87 // -0.73%

Prices broke support at the bottom of a bearish Rising Wedge chart pattern after putting in a Dark Cloud Cover candlestick pattern at resistance in the 1790.55-1802.80 area. Negative RSI divergence reinforces the case for a downward reversal. Sellers are now testing below the 23.6% Fibonacci retracement at 1747.20, with a break below that targeting the 38.2% level at 1717.13. The Wedge bottom, now at 1764.25, has been recast as near-term resistance.

Commodities_Look_to_US_Economic_Data_Citigroup_Earnings_for_Direction_body_Picture_4.png, Commodities Look to US Economic Data, Citigroup Earnings for Direction

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $33.52 // -0.48 // -1.40%

Prices followed the completion of a Bearish Engulfing candlestick pattern with a break of range support at 33.66. Sellers are now testing beneath the next downside barrier at 33.18, the 23.6% Fibonacci retracement, with a daily close beneath that exposing the 38.2% level at 31.83. Negative RSI divergence bolsters the case for a downside scenario. The 33.66 level has been recast as resistance, with a push back above that targeting the 35.00 figure.

Commodities_Look_to_US_Economic_Data_Citigroup_Earnings_for_Direction_body_Picture_5.png, Commodities Look to US Economic Data, Citigroup Earnings for Direction

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.704 // -0.048 // -1.28%

Prices edged through support at 3.707, the 23.6% Fibonacci retracement, to test the bottom of a falling channel set from mid-September. A push below this boundary targets the 38.2% level at 3.627. The 3.707 mark has been recast as near-term resistance, with a break above that aiming for the channel top at 3.802.

Commodities_Look_to_US_Economic_Data_Citigroup_Earnings_for_Direction_body_Picture_6.png, Commodities Look to US Economic Data, Citigroup Earnings for Direction

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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15 October 2012 06:33 GMT