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Commodities at Risk as Growth Fears Weigh on Risk Trends, Boost Dollar

Commodities at Risk as Growth Fears Weigh on Risk Trends, Boost Dollar

2012-09-05 08:52:00
Ilya Spivak, Head Strategist, APAC
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Talking Points

Commodity prices are under pressure in European trade as global slowdown fears stoke risk aversion across financial markets in the wake of disappointing economic news-flow over the past 24 hours. The ISM Manufacturing gauge unexpectedly showed factory-sector activity shrank again in August, the composite Eurozone PMI gauge was revised lower and overnight reports from China and Australia struck a dour note.

The US calendar is relatively quiet, with traders left to look to the rhetoric accompanying a rate decision from the Bank of Canada for guidance on North American growth trends. S&P 500 stock index futures are pointing firmly lower, suggesting the risk-off mood is likely to carry forward. This stands to weigh on cycle-sensitive crude oil and copper prices while gold and silver face de-facto selling pressure courtesy of returning haven demand for the US Dollar.

WTI Crude Oil (NY Close): $95.30 // -1.17 // -1.21%

Prices are testing below support at the bottom of a rising channel set from the June 28 low (95.72). Initial resistance is at 97.82, the 61.8% Fibonacci retracement, with a break higher exposing the 100.00 figure and 100.65. Alternatively, a reversal through channel support initially targeting the 50% Fib at 93.90.

Commodities_at_Risk_as_Growth_Fears_Weigh_on_Risk_Trends_Boost_Dollar_body_Picture_3.png, Commodities at Risk as Growth Fears Weigh on Risk Trends, Boost Dollar

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1695.75 // +3.25 // +0.19%

Prices are stalling near the 1700/oz figure after taking out critical resistance at 1674.65, the intersection of the 38.2% Fibonacci retracement and a falling trend line set from the August 23 2011 swing high. A push above 1700 will likely challenge the 50% Fib at 1721.65. The 1674.65 level has been recast as near-term support, with a break back below that clearing the way for a re-test of the trend line (now at 1665.36) and the August 31 low at 1645.76.

Commodities_at_Risk_as_Growth_Fears_Weigh_on_Risk_Trends_Boost_Dollar_body_Picture_4.png, Commodities at Risk as Growth Fears Weigh on Risk Trends, Boost Dollar

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $32.34 // +0.25 // +0.77%

Prices broke resistance at 31.79, the 50% Fibonacci retracement, with buyers now aiming to challenge the 32.93-33.14 area marked by a horizontal pivot level and the 61.8% level. A break above that targets the 76.4% Fib at 34.80. The 31.79 level has been recast as support, with a break back below that exposing the 38.2% retracement at 30.45.

Commodities_at_Risk_as_Growth_Fears_Weigh_on_Risk_Trends_Boost_Dollar_body_Picture_5.png, Commodities at Risk as Growth Fears Weigh on Risk Trends, Boost Dollar

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.470 // +0.012 // +0.35%

Prices are pulling back to support at 3.438, with a break below that exposing the bottom of a rising channel set from the August 2 low (3.420). Near-term resistance lines up at 3.535. A push above that targets the channel top at 3.555.

Commodities_at_Risk_as_Growth_Fears_Weigh_on_Risk_Trends_Boost_Dollar_body_Picture_6.png, Commodities at Risk as Growth Fears Weigh on Risk Trends, Boost Dollar

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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