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Crude Oil, Gold to Rise as US Dollar Succumbs to Profit-Taking

Crude Oil, Gold to Rise as US Dollar Succumbs to Profit-Taking

2011-12-16 10:24:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • Crude Oil Likely to Rise as Risky Assets Rebound into Year-End
  • Gold, Silver Positioned to Capitalize on Corrective Dollar Weakness

WTI Crude Oil (NY Close): $93.87 // -1.08 // -1.14%

Crude oil prices are on the upswing amid a broad-based recovery in risk appetite in European trading hours and S&P 500 stock index futures are ticking higher to hint more of the same is on tap as Wall Street comes online. The move appears to owe to seasonal factors as corrective profit-taking begins to take over ahead of the year end. US CPI figures round out the docket of scheduled event risk for the week, with expectations calling for the headline and core inflation rates to hold unchanged from the previous month in November.

On the technical front, prices took out horizontal resistance-turned-support at 94.58, hitting interim support at the bottom of a minor falling channel. Continued selling from here exposes the next downside barrier at 90.14. The 94.58 level has been recast as near-term resistance.

Crude_Oil_Gold_to_Rise_as_US_Dollar_Succumbs_to_Profit-Taking_body_Picture_3.png, Crude Oil, Gold to Rise as US Dollar Succumbs to Profit-Taking

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1570.52 // -3.53 // -0.22%

The outlook for gold is little changed from what we discussed yesterday, with the recovery in risk appetite likely supportive in that it weighs against the safe-haven US Dollar and offers the metal a de-facto lift. Prices put in a Spinning Top candlestick major support at 1562.55, the intersection of a former resistance level dating back to early May and a rising trend line that has guided the uptrend since October 2008. The setup hints a bounce may be ahead, with the case for an upside scenario bolstered by deeply oversold RSI studies. Initial resistance lines up at 1609.05.

Crude_Oil_Gold_to_Rise_as_US_Dollar_Succumbs_to_Profit-Taking_body_Picture_4.png, Crude Oil, Gold to Rise as US Dollar Succumbs to Profit-Taking

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $29.16 // +0.25 // +0.85%

As with gold, a recovery in risk appetite promises to boost silver as the safe-haven US Dollar takes a corrective step backward. Prices put in a Hammer candlestick above support at 28.41, the October 5 wick low, hinting a bounce is ahead. Near-term resistance is at 29.79, with a break above that aiming for former rising trend line support now at 31.75. Alternatively, renewed selling exposes the September 26 low at 26.05.

Crude_Oil_Gold_to_Rise_as_US_Dollar_Succumbs_to_Profit-Taking_body_Picture_5.png, Crude Oil, Gold to Rise as US Dollar Succumbs to Profit-Taking

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 me on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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