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Commodities: Crude Oil, Gold May Find Support on US Recovery Hopes

By , Currency Strategist
28 November 2012 08:20 GMT

Crude oil and gold are under pressure in European trade but prices may find support as US economic data and the Fed’s Beige Book boost risk appetite.

Talking Points

  • Commodities Sold with Risk Trends on OECD “Fiscal Cliff” Warning
  • US New Home Sales Data, Fed Beige Book May Offer Tentative Support

Commodities under pressure in early European trade, with the newswires citing ominous comments from the OECD warning a global recession could follow a failure to avert the US fiscal cliff as the catalyst. S&P 500 stock index futures are pointing lower, hinting more of the same is on tap as Wall Street comes online. The day’s economic data docket may help offset near-term negativity however.

First, preliminary set of November’s German CPI figures is expected to see the headline inflation rate drop to 1.9 percent, the lowest in four months. This may be seen as giving the ECB additional room to ease monetary policy, which bodes well for sentiment considering the recession in the Eurozone represents the most significant headwind presently facing global growth.

Later in the day, US New Home Sales are expected to hit 390,000 in October, marking the highest reading since April 2010. The Fed’s Beige Book survey of regional economic conditions is also on tap. Signs of firming growth in the world’s largest economy are likely to buoy overall risk appetite amid hopes it will be better able to counterbalance sluggish performance in Europe and Asia.

A recovery in sentiment is likely to boost growth-geared crude oil and copper prices, where near-term correlations with share prices remain significant. Meanwhile, gold and silver may find de-facto support as swelling risk appetite dents haven demand for the US Dollar.

WTI Crude Oil (NY Close): $87.18 // -0.56 // -0.64%

Prices are consolidating below resistance at 89.48, the 23.6% Fibonacci expansion. Initial rising trend line support is at 87.17, with a break below that on a daily closing basis exposing the November 7 low at 84.04. Alternatively, a push above resistance targets the 38.2% level at 92.88.

Commodities_Crude_Oil_Gold_May_Find_Support_on_US_Recovery_Hopes_body_Picture_4.png, Commodities: Crude Oil, Gold May Find Support on US Recovery Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1742.15 // -6.50 // -0.37%

Prices appear to have carved out a bullish Inverse Head and Shoulders chart pattern confirmed with a close above neckline resistance at 1737.28, 23.6% Fibonacci retracement. The setup implies a measured upside target at 1802.06. The 1737.28 level has been recast as near-term support, with a break below that aiming for the 38.2% Fib at 1688.65.

Commodities_Crude_Oil_Gold_May_Find_Support_on_US_Recovery_Hopes_body_Picture_3.png, Commodities: Crude Oil, Gold May Find Support on US Recovery Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $34.06 // -0.10 // -0.29%

Prices are testing resistance at 34.18, the 38.2% Fibonacci expansion. A break above that exposes the 50% level at 35.29. Near-term rising trend line support is at 33.12 and is reinforced by the 23.6% Fib at 32.84. A drop below the latter level aims for the November 5 low at 30.65.

Commodities_Crude_Oil_Gold_May_Find_Support_on_US_Recovery_Hopes_body_Picture_2.png, Commodities: Crude Oil, Gold May Find Support on US Recovery Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.536 // 0.000 // 0.00%

Prices are consolidating below resistance at 3.540, the 38.2% Fibonacci retracement. Initial support lines up at 3.487, the 23.6% level, with a break below that aiming for rising trend line support at 3.414. Alternatively, push above 3.540 targets the 50% Fib at 3.588.

Commodities_Crude_Oil_Gold_May_Find_Support_on_US_Recovery_Hopes_body_Picture_1.png, Commodities: Crude Oil, Gold May Find Support on US Recovery Hopes

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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28 November 2012 08:20 GMT