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Commodities: All Eyes on ECB Amid Hopes for Stimulus Measures

Commodities: All Eyes on ECB Amid Hopes for Stimulus Measures

2012-11-08 09:00:00
Ilya Spivak, Sr. Currency Strategist
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Commodities may rise if the ECB hints it is preparing to introduce stimulus measures to battle deepening Eurozone recession, buoying risk appetite.

Talking Points

  • Crude Oil, Gold to Rise if ECB Hints at Stimulus Measures Ahead
  • Trade Balance, Jobless Claims Headline Quiet US Economic Calendar

Metals are treading water while crude oil is mounting a cautious corrective recovery after yesterday’s aggressive selloff in early European trade. All eyes are on the European Central Bank interest rate decision, with traders pining for growth-supportive measures as the recession in the Eurozone continues to stand as the most significant obstacle to global growth.

Traders’ priced-in expectations as well as economists’ baseline forecasts point away from action this time around however. That will shift the spotlight to commentary from ECB President Mario Draghi at a press conference following the meeting.

Clues about forthcoming stimulus measures may boost risk appetite, sending sentiment-linked crude oil and copper higher. Gold and silver are likewise likely to advance in such a scenario, finding de-facto support as the US Dollar declines amid waning safe-haven demand. Needless to say, a disappointingly hawkish outcome may yield the opposite reaction.

The US economic calendar is relatively tame, with Trade Balance and weekly Jobless Claims figures rounding out a limited docket of event risk. S&P 500 stock index futures are trading flat, pointing to indecision on the risk sentiment front before the ECB announcement crosses the wires.

WTI Crude Oil (NY Close): $84.44 // -4.27 // -4.81%

Prices are stalling above the 85.00 figure, a barrier reinforced by the 50%Fibonacci expansion at 83.76. Initial resistance lines up at 87.66, the 38.2% Fib, with a break above that targeting a falling trend line set from late September (now at 91.48). Alternatively, a break below 83.76 targets the 80.00 figure and 61.8% level at 79.84.

Commodities_All_Eyes_on_ECB_Amid_Hopes_for_Stimulus_Measures_body_Picture_3.png, Commodities: All Eyes on ECB Amid Hopes for Stimulus Measures

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1717.75 // +1.75 // +0.10%

Prices put in a Bullish Engulfing candlestick pattern above support at 1693.06, the 38.2% Fibonacci retracement, hinting a bounce may be ahead. Initial resistance lines up at a falling trend line set from the October 5 swing high (1707.74). A break above that exposes the 1732.33-35.65 area, marked by a horizontal pivot level and the 23.6% Fib. Alternatively, a drop below support targets the 50% level at 1661.32.

Commodities_All_Eyes_on_ECB_Amid_Hopes_for_Stimulus_Measures_body_Picture_4.png, Commodities: All Eyes on ECB Amid Hopes for Stimulus Measures

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $31.83 // -0.16 // -0.51%

Prices are retesting the 38.2% Fibonacci retracement at 32.36, with a break above that exposing the 33.51-66 area marked by the 23.6% level and a former range bottom. Near-term support lines up at 31.43, the 50% retracement. A push back beneath that targets the 61.8% Fib at 30.50.

Commodities_All_Eyes_on_ECB_Amid_Hopes_for_Stimulus_Measures_body_Picture_5.png, Commodities: All Eyes on ECB Amid Hopes for Stimulus Measures

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.442 // -0.064 // -1.83%

Prices are bouncing from support at 3.462, the 50% Fibonacci expansion. Near-term resistance lines up at 3.550, the 38.2% level, with a break above that targeting the 23.6% Fib at 3.659. Alternatively, a break below 3.462 targets trend line support at 3.395 and the 61.8% level at 3.372.

Commodities_All_Eyes_on_ECB_Amid_Hopes_for_Stimulus_Measures_body_Picture_6.png, Commodities: All Eyes on ECB Amid Hopes for Stimulus Measures

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

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