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Commodities: Crude Oil, Gold May Find Added Fuel in ECB Rate Decision

By , Currency Strategist
10 January 2013 11:08 GMT

Crude oil and gold prices may find fuel to continue higher as a dovish turn at the ECB buoys risk appetite and weighs on haven demand for the US Dollar.

Talking Points

  • Crude Oil, Copper May Rise with Stocks if ECB Rate Decision Yields Stimulus Clues
  • Gold and Silver to Find De-Facto Support in Risk Appetite as US Dollar Turns Lower

Commodities are on the upswing in the wake of dramatically better-than-expected Chinese export figures. December’s report showed overseas sales rose 14.1 percent year-on-year, nearly tripling forecasts calling for a 5 percent increase and buoying global recovery bets. The risk-on mood may get a further boost from the ECB interest rate decision.

Leading indicators suggest Eurozone GDP probably shrank again in the fourth quarter while inflation is at a two-year low. Meanwhile, periphery bond yields have dropped since the unveiling of the OMT program mid last year, reflecting ebbing sovereign risk premiums and normalization of policy transmission. This seems to create an environment that both calls for and is able to support monetary stimulus.

With that in mind, clues about forthcoming accommodation that emerge in ECB President Mario Draghi’s press conference following the rate announcement may prove supportive for overall risk appetite. After all, aside from uncertainty about looming US austerity, the recession in the Euro area is the most critical headwind for global performance at large.

S&P 500 index futures are pointing firmly higher, hinting sentiment is positioned to improve further. This points to continued gains for cycle-sensitive crude oil and copper prices. Meanwhile, anti-fiat gold and silver stand to find de-facto support as swelling risk appetite dents haven demand for the US Dollar.

WTI Crude Oil (NY Close): $93.10 // -0.05 // -0.05%

Prices are testing above resistance at 93.25, the 100% Fibonacci expansion. A break higher targets the 123.6% expansion at 94.51. 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 that exposes the 90.00 figure.

Commodities_Crude_Oil_Gold_May_Find_Added_Fuel_in_ECB_Rate_Decision_body_Picture_4.png, Commodities: Crude Oil, Gold May Find Added Fuel in ECB Rate Decision

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1657.75 // -1.50 // -0.09%

Prices found support at the bottom of a falling channel set from mid-September 2012, recovering to the 23.6% Fibonacci retracement at 1665.66. A break above that exposes the 38.2% level at 1690.39. The first layer of major support is at 1619.79, the channel bottom.

Commodities_Crude_Oil_Gold_May_Find_Added_Fuel_in_ECB_Rate_Decision_body_Picture_3.png, Commodities: Crude Oil, Gold May Find Added Fuel in ECB Rate Decision

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $30.37 // -0.01 // -0.04%

Prices are testing above resistance at 30.43, the 23.6% Fibonacci retracement. A break above that exposes falling channel support-turned-resistance at 31.00, a barrier reinforced by the 38.2% level at 31.19. Near-term support is at 30.10.

Commodities_Crude_Oil_Gold_May_Find_Added_Fuel_in_ECB_Rate_Decision_body_Picture_2.png, Commodities: Crude Oil, Gold May Find Added Fuel in ECB Rate Decision

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.670 // -0.002 // -0.05%

Prices are bouncing from support at 3.671, the 61.8% Fibonacci retracement. Near-term resistance is at 3.734, the 76.4% level. A break above that exposes a rising channel top at 3.779. Alternatively, a break below support exposes the 50% Fib at 3.620.

Commodities_Crude_Oil_Gold_May_Find_Added_Fuel_in_ECB_Rate_Decision_body_Picture_1.png, Commodities: Crude Oil, Gold May Find Added Fuel in ECB Rate Decision

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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10 January 2013 11:08 GMT