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Crude Oil, Gold May Struggle to Further Post-Cyprus Deal Trends

Crude Oil, Gold May Struggle to Further Post-Cyprus Deal Trends

2013-03-25 13:15:00
Ilya Spivak, Head Strategist, APAC
Share:

Crude oil is on the upswing while gold is under pressure in the wake an agreement on a bailout for Cyprus but the trends now on display may prove short-lived.

Talking Points

  • Crude Oil is on the Rise as Cyprus Bailout Deal Stokes Risk Appetite
  • Gold and Silver Turn Lower on Diminished Market Dislocation Fears

Crude oil is pushing higher along with Asian and European stock exchanges as risk appetite firms after Cyprus and the so-called “troika” (EU/ECB/IMF) agreed to measures paving the way for launch of the country’s bailout program. Gold and silver are trading lower as the apparent reduction in tail risk stemming from the agreement dents demand for alternative store-of-value assets. A lackluster response from the Euro hints not all is well however, warning that the optimism in the shares and commodities spaces may not prove lasting.

Forex traders’ lack of enthusiasm seems reasonable. The critical issue in for markets in following the Cyprus situation remains that of precedent for larger Eurozone countries, and the way in which the crisis has been managed does not seem to inspire a great deal of confidence. At best, depositors in Cypriot banking institutions now have to contend with capital controls locking up their money. At worst, they may lose as much as 40 percent of it.

This raises an important question: why should a depositor in any Eurozone country similarly vulnerable to a banking crisis expect to be unscathed if a Cyprus-like calamity were to occur there? If this expectation seems unreasonable in light of today’s events, said depositor (and many others) may well opt not to keep money in the Eurozone. This leaves markets waiting to see if a mass exodus of capital does indeed occur, for then the worst-case scenario will be upon the Eurozone whether or not Cyprus receives its aid.

WTI Crude Oil (NY Close): $93.71 // +1.26 // +1.36%

Prices are testing resistance at 94.07, the March 19 swing high, with a break higher on a daily closing basis targeting 95.51. A break above that targets trend line resistance at 96.33. Near-term support is at 91.97, the 23.6% Fibonacci expansion.

Commodities_Oil_Gold_May_Struggle_to_Further_Post-Cyprus_Deal_Trends__body_Picture_3.png, Crude Oil, Gold May Struggle to Further Post-Cyprus Deal Trends

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1608.58 // -6.30 // -0.39%

Prices are approaching support at 1597.76, the 14.6% Fibonacci expansion, with a break lower exposing the 23.6% level at 1586.30. Near-term resistance is at 1616.98, the March 21 high. A move above that aims for a longer-term falling trend line at 1642.66.

Commodities_Oil_Gold_May_Struggle_to_Further_Post-Cyprus_Deal_Trends__body_Picture_4.png, Crude Oil, Gold May Struggle to Further Post-Cyprus Deal Trends

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.74 // -0.44 // -1.49%

Prices continue to consolidate above support at 28.46, the 23.6% Fibonacci expansion. Near-term resistance is in the 29.42-92 area, with a break higher exposing a falling trend line now at 30.24. Alternatively, a reversal below support targets the 38.2% level at 27.86.

Commodities_Oil_Gold_May_Struggle_to_Further_Post-Cyprus_Deal_Trends__body_Picture_5.png, Crude Oil, Gold May Struggle to Further Post-Cyprus Deal Trends

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.466 // +0.030 // +0.87%

Prices are testing above resistance at 3.483, the 23.6% Fibonacci retracement. A break higher exposes the 38.2% level at 3.542. Near-term support is at 3.447, the 14.6% Fib, with move beneath that aiming for the March 19 swing low at 3.388.

Commodities_Oil_Gold_May_Struggle_to_Further_Post-Cyprus_Deal_Trends__body_Picture_6.png, Crude Oil, Gold May Struggle to Further Post-Cyprus Deal 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

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