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Crude Oil, Gold Outlook Hinges on Euro Debt Crisis News Flow

Crude Oil, Gold Outlook Hinges on Euro Debt Crisis News Flow

2011-12-19 09:38:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • Crude Oil Pressured by Risk Aversion But Chart Hints at Bounce Ahead
  • Gold Taking Cues from US Dollar’s Response to Euro Crisis News Flow

WTI Crude Oil (NY Close): $93.53 // -0.34 // -0.36%

Crude oil prices are under pressure in European trade as Eurozone debt crisis jitters and the death of Kim Jong-il set off market-wide risk aversion. Looking ahead, the tone is likely to be set by a French bill auction (14:00 GMT) – with traders keeping a close eye on demand and yield levels – as well as the outcome of a conference call between Eurozone finance ministers expected to produce the final plans for funneling crisis aid funds via the IMF (14:30 GMT). ECB President Mario Draghi is also scheduled to speak to the European Parliament Committee (15:30 GMT).

Prices are testing the bottom of a falling channel set from mid-November, with a Spinning Top candlestick hinting a bounce may be ahead. Initial resistance lines up at 94.58, with a push above that targeting the December 9 low at 97.35. Alternatively, a break lower initially exposes 90.49.

Crude_Oil_Gold_Outlook_Hinges_on_Euro_Debt_Crisis_News_Flow_body_Picture_3.png, Crude Oil, Gold Outlook Hinges on Euro Debt Crisis News Flow

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1598.95 // +28.43 // +1.81%

As with crude oil, gold prices are down in Europe as risk aversion feeds demand for the safe-haven US Dollar, amounting to de-facto downward pressure on the yellow metal. Also in line with the WTI contract, a quiet US economic calendar is likely to keep the focus on Eurozone debt crisis developments and their implications for sentiment at large.

Prices are testing resistance at 1609.05 having bounced from 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. A break higher exposes 1680.55. Alternatively, a daily close below 1562.55 would amount to a major bearish trend change.

Crude_Oil_Gold_Outlook_Hinges_on_Euro_Debt_Crisis_News_Flow_body_Picture_4.png, Crude Oil, Gold Outlook Hinges on Euro Debt Crisis News Flow

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $29.74 // +0.59 // +2.01%

Mirroring gold, silver is taking sits cues from risk appetite as transmitted via the direction of the US Dollar, with the focus now on Eurozone news flow in the day ahead. 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 31.80. Alternatively, renewed selling exposes the September 26 low at 26.05.

Crude_Oil_Gold_Outlook_Hinges_on_Euro_Debt_Crisis_News_Flow_body_Picture_5.png, Crude Oil, Gold Outlook Hinges on Euro Debt Crisis News Flow

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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