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Commodities Pull Back Amid Correction in Risk Sentiment Trends

Commodities Pull Back Amid Correction in Risk Sentiment Trends

2012-07-04 08:30:00
Ilya Spivak, Head Strategist, APAC
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Talking Points

Commodity prices are trading a touch lower in European trade. Growth-geared crude oil and copper are following stocks lower while gold and silver are facing de-facto pressure as safe-haven flows buoy the US Dollar.

The move appears to reflect corrective profit-taking as risk sentiment trends return to a neutral setting ahead of today’s US market holiday and Thursday’s heavy event risk rather than a particular near-term catalyst. The European Central Bank and the Bank of England are both due to deliver their monthly policy announcements, with additional easing expected on both fronts.

Importantly, thin liquidity conditions can amplify otherwise shallow moves across the spectrum of asset classes. With that in mind, it seems wise not to assume the existence of meaningful conviction behind any emerging volatility for the time being.

WTI Crude Oil (NY Close): $87.66 // +3.91 // +4.67%

Prices continue to push higher after a Piercing Line candlestick pattern sparked a reversal as expected, taking out the 23.6% Fibonacci retracement at 85.11 to expose the 38.2% level at 89.97. The psychologically significant 90.00 reinforces the upside barrier. The 85.11 has been recast as near-term support.

Commodities_Pull_Back_Amid_Correction_in_Risk_Sentiment_Trends_body_Picture_3.png, Commodities Pull Back Amid Correction in Risk Sentiment Trends

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1617.35 // +20.25 // +1.27%

Prices took out resistance at 1606.74, the 23.6%Fibonacci expansion, to challenge falling trend line resistance set from late March (now at 1620.04). A break above this boundary initially exposes the June 6 swing high at 1640.80. The 1606.74 level has been recast as support, with a push back below that exposing the 38.2% Fib at 1585.44.

Commodities_Pull_Back_Amid_Correction_in_Risk_Sentiment_Trends_body_Picture_4.png, Commodities Pull Back Amid Correction in Risk Sentiment Trends

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.27 // +0.78 // +2.84%

Prices are retesting the formerly broken bottom of a Flag chart formation, now at 28.52. A break higher exposes the 29.00 figure and 29.42. Near-term support is at 26.75, with a break below that exposing the multi-month triple bottom at 26.05.

Commodities_Pull_Back_Amid_Correction_in_Risk_Sentiment_Trends_body_Picture_5.png, Commodities Pull Back Amid Correction in Risk Sentiment Trends

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.540 // +0.070 // +2.02%

Prices broke above falling trend line support-turned-resistance set from late January to challenge the 50% Fibonacci retracement at 3.548. A break higher exposes the next layer of resistance in the 3.618-21 area marked by a former support level and the 61.8% Fib. The 38.2% retracement at 3.474 and a former range top at 3.424 line up as near-term downside barriers.

Commodities_Pull_Back_Amid_Correction_in_Risk_Sentiment_Trends_body_Picture_6.png, Commodities Pull Back Amid Correction in Risk Sentiment Trends

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

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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