Gold, Metals Set to Correct Higher Ahead of US Rate Decision

Commodities - Energy

Oil Rebound to Continue Ahead of US Fed Policy Announcement

Crude Oil (WTI)       $71.16        +$0.47        +0.66%
An ascending triangle bullish continuation pattern has been confirmed as prices took out resistance at $71.18, suggesting the upswing from the latest swing bottom below $69 is set to continue. Initial resistance from here is seen at $72.39. The calendar is heavy with scheduled event risk: housing starts data will be important as the US construction sector is the world’s largest consumer of crude, whereas a likely uptick in consumer prices will help to shape sentiment heading into the afternoon’s FOMC monetary policy announcement. On balance, price action may be mute until the Fed decision hits the tape with markets anxious for validation that recent improvements in payrolls and retail sales will translate into higher interest rates. The ultimate impact of a less dovish Fed on oil prices remains clouded however with prices taking conflicting cues from an economy rebounding faster than expected (which is oil positive) and an invariably stronger US dollar (which is oil negative).




Commodities - Metals

Gold, Silver Set to Gain Ahead of US Rate Decision

Gold       $1130.25       +$5.05       +0.45%
Gold broke out of a minor falling channel and are now poised to continue correcting higher, with initial resistance lining up at $1149.40. Prices have retained a strong correlation to the spread between March 2010 and December 2010 90-day fed funds futures (essentially the priced-in 2010 Fed rates outlook), so all eyes will be focused first on US CPI and later on the FOMC rate decision. Traders will be looking for reinforcement of the recent boost to US rate expectations from better-than-expected payrolls and retail sales figures.

Silver       $17.50       +$0.09       +0.49%
Silver rebounded in line with its more expensive counterpart and is now testing resistance at $17.60, the 12/11 swing top. Fundamentally, the landscape is much the same as that of gold, with the US rates outlook being of primary importance. Consequently, FOMC is the key catalyst to watch here as well.




For real time news and analysis, please visit http://forexstream.dailyfx.com

To receive future articles by email, please contact Ilya at ispivak@dailyfx.com