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Crude Oil to Rise as Gold Falls on Orderly Cyprus Banks Reopen

Crude Oil to Rise as Gold Falls on Orderly Cyprus Banks Reopen

2013-03-28 07:47:00
Ilya Spivak, Head Strategist, APAC
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Crude oil is likely to rise amid a recovery in risk appetite while gold prices fall if Cyprus manages an orderly reopening of the troubled nation’s banks.

Talking Points

  • Crude Oil, Copper Look to Reopening of Cyprus Banks to Guide Risk Trends
  • Gold Prices to Decline as Silver Moves Higher on Recovery in Risk Sentiment

Commodity prices are treading water in late Asian trade as markets continue to cast a worried eye toward the Eurozone. Needless to say, lingering uncertainty in Cyprus and political instability in Italy remain in focus. Greek newspaper Kathimerini reported that Cypriot banks will finally reopen today and traders will be closely watching to gauge the effectiveness of capital controls installed to prevent a mass exodus of capital.

A relatively orderly reopening may boost risk appetite, sending cycle-sensitive crude oil and copper prices higher. The XAU/XAG ratio is showing an increasingly significant inverse correlation with our in-house risk appetite gauge, hinting such an outcome stands to weigh on gold while boosting silver. Signs of social unrest or reports of banks flouting the new rules stand to yield the opposite results.

Meanwhile in Italy, Democratic Party Leader Pier Luigi Bersani is expected to report that he was not able to forge a coalition today, clearing the way for President Napolitano to tap a neutral politician to attempt to form a government that brings together the various Italian political factions. Investors will be keen to learn who this may be and gauge whether he/she has the wherewithal to succeed in producing a pro-reform administration.

S&P 500 index futures are pointing lower, warning that the path of least resistance for risk appetite favors the downside. On the economic data front, the spotlight is on the final revision of fourth-quarter US GDP figures. Weekly Jobless Claims data as well as the Chicago PMI and Kansas City Fed Manufacturing Activity leading indicators are likewise on tap.

WTI Crude Oil (NY Close): $96.58 // +0.24 // +0.25%

Prices broke resistance at 96.41, the 50% Fibonacci expansion, a barrier reinforced by a falling trend line set from late January. Buyers now target the 61.8% Fib at 98.09. The 96.41 level has been recast as near-term support, with a turn back beneath that exposing the 38.2% Fib at 94.74.

Commodities_Oil_to_Rise_as_Gold_Falls_on_Orderly_Cyprus_Banks_Reopen_body_Picture_3.png, Crude Oil to Rise as Gold Falls on Orderly Cyprus Banks Reopen

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1605.25 // +5.21 // +0.33%

Prices are testing support at 1597.77, the 14.6% Fibonacci expansion, a barrier reinforced by a rising trend line set from late February (1596.09). A break below that exposes the 23.6% level at 1586.27. Near-term resistance is at 1616.98, the March 21 high, with a reversal above that aiming for a longer-term falling trend line at 1638.85.

Commodities_Oil_to_Rise_as_Gold_Falls_on_Orderly_Cyprus_Banks_Reopen_body_Picture_4.png, Crude Oil to Rise as Gold Falls on Orderly Cyprus Banks Reopen

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.69 // -0.08 // -0.27%

Prices continue to consolidate above support at 28.46, the 23.6% Fibonacci expansion. A break below that exposes the 38.2% level at 27.86.Near-term resistance is in the 29.42-92 area, with a break higher targeting a falling trend line now at 30.06.

Commodities_Oil_to_Rise_as_Gold_Falls_on_Orderly_Cyprus_Banks_Reopen_body_Picture_5.png, Crude Oil to Rise as Gold Falls on Orderly Cyprus Banks Reopen

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.444 // +0.002 // +0.06%

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

Commodities_Oil_to_Rise_as_Gold_Falls_on_Orderly_Cyprus_Banks_Reopen_body_Picture_6.png, Crude Oil to Rise as Gold Falls on Orderly Cyprus Banks Reopen

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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