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Commodities: Euro FinMin Summit Puts Crude Oil, Gold at Risk

Commodities: Euro FinMin Summit Puts Crude Oil, Gold at Risk

2012-11-20 10:27:00
Ilya Spivak, Head Strategist, APAC
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Crude oil and gold prices may reverse lower if Eurozone finance ministers fail to reach a deal on Greek bailout funding at today’s summit.

Talking Points

  • Crude Oil, Copper Follow Stocks Lower Before Eurozone FinMin Meeting
  • Gold and Silver to Fall With Sentiment on Lack of Greek Funding Deal
  • Soft US Housing Starts, Building Permits Data May Boost Risk Aversion

Sentiment-linked crude oil and copper prices are following shares lower in early European trade as investors cast an uneasy eye toward a meeting of Eurozone finance ministers on tap later today. Policymakers are set to tackle the thorny issue of Greek bailout funding. Athens has struggled to reach agreement with the so-called “troika” (EU, ECB, IMF) about the release of the latest tranche of bailout funding. Continued failure to secure a deal that restarts the near-term flow of rescue cash and deals with paying for the cost of extending the deadline for Greece to meet its budgetary objectives by two years is likely to fan the flames of sovereign risk anew.

Gold and silver are trading flat for the time being but confirmation of the adverse scenario here is likely to bring the precious under pressure as well as haven-seeking capital flows buoy the US Dollar and undermine assets denominated in terms of the benchmark currency. US Housing Starts and Building Permits data headlines the economic calendar, with moderation expected in October compared with the prior month. This may compound the risk-off dynamic, chipping away at hopes for a stronger US recovery’s ability to countervail headwinds facing global growth from Europe and Asia.

WTI Crude Oil (NY Close): $89.28 // +2.61 // +3.01%

Prices pushed above resistance at 87.70, the 38.2% Fibonacci expansion, exposing the 90.00 figure and the 23.6% level at 92.53. A further break above the latter level aims for a longer-term trend line resistance now at 95.75. The 87.70 level has been recast as support, with a reversal below that exposing the 50% barrier at 83.79.

Commodities_Euro_FinMin_Summit_Puts_Crude_Oil_Gold_at_Risk_body_Picture_4.png, Commodities: Euro FinMin Summit Puts Crude Oil, Gold at Risk

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1731.70 // +17.95 // +1.05%

Prices are testing resistance at 1737.28, the 23.6% Fibonacci retracement. A break above that targets the 1790.55-1802.80 area. Near-term support lines up at 1701.09, the 38.2% Fib. This is reinforced by the 1700 figure and a rising trend line at 1687.69. A push below the latter level exposes the 50% retracement at 1642.57.

Commodities_Euro_FinMin_Summit_Puts_Crude_Oil_Gold_at_Risk_body_Picture_3.png, Commodities: Euro FinMin Summit Puts Crude Oil, Gold at Risk

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $33.12 // +0.79 // +2.44%

Prices have started to accelerate higher after taking out resistance at 32.36, the 38.2% Fibonacci retracement. The bulls are aiming to challenge the 33.51-66 area marked by the 23.6% level and a former range bottom. A break above that targets the 35.00 figure. The 32.36 level has been recast as support, with a drop back below that targeting the 38.2% Fib at 31.43.

Commodities_Euro_FinMin_Summit_Puts_Crude_Oil_Gold_at_Risk_body_Picture_2.png, Commodities: Euro FinMin Summit Puts Crude Oil, Gold at Risk

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.528 // +0.076 // +2.20%

Prices reversed higher from support at a rising trend line set from early October 2011, taking out the 23.6% Fibonacci retracement at 3.505. The 38.2% level at 3.568 lines up as the next upside objective. The 3.505 level has been recast as support, with reversal back below that exposing the trend line (now at 3.406) anew.

Commodities_Euro_FinMin_Summit_Puts_Crude_Oil_Gold_at_Risk_body_Picture_1.png, Commodities: Euro FinMin Summit Puts Crude Oil, Gold at Risk

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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