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Crude Oil, Gold Look to Fed-Speak for Direction Cues

Crude Oil, Gold Look to Fed-Speak for Direction Cues

2013-05-21 11:08:00
Ilya Spivak, Head Strategist, APAC
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Commodity prices look to commentary from Fed Presidents Bullard and Dudley to shape QE progression expectations and offer direction cues.

Talking Points

  • Crude Oil, Copper Wait for Risk Trends to Weigh Up Fed Policy Outlook
  • Gold and Silver Vulnerable if Fed Chatter Hints at Tapering of QE3 Efforts

Commodities treading water in European trade as markets wait for guidance from two prominent monetary policy speeches by St. Louis and New York Federal Reserve Presidents James Bullard and Bill Dudley, respectively. After hearing perennial dove Charles Evans was “open-minded” to the idea of tapering QE3 purchases, investors will look for similar-sounding rhetoric to set the stage for tomorrow’s Ben Bernanke testimony.

If that is to materialize, the subsequent response from financial markets will prove interesting as a pace-setting gauge of whether risk appetite trends (and with them cycle-sensitive crude oil and copper price) will respond favorably to the positive growth implications of firming US recovery or negatively to the prospect of stimulus removal. S&P 500 index futures are trading flat ahead of the opening bell on Wall Street, hinting a lack of conviction in the sentiment space and opening the door for volatility. The response from gold and silver is likely to be more straight-forward, with signs pointing to an earlier unwinding of accommodation that previously expected set to erode anti-fiat demand and weigh on precious metals.

Crude Oil Technical Analysis (WTI) - Prices broke above resistance at 96.50, the 38.2% Fibonacci expansion (a barrier reinforced by a falling trend line set from late January). Buyers now aim to challenge the 50% level at 97.85, with a break above that targeting the 61.8% Fib at 99.21. Alternatively, a reversal back beneath 96.50 eyes the 23.6% expansion at 94.82.

Commodities_Crude_Oil_Gold_Look_to_Fed-Speak_for_Direction_Cues_body_Picture_3.png, Crude Oil, Gold Look to Fed-Speak for Direction Cues

Daily Chart - Created Using FXCM Marketscope 2.0

Gold Technical Analysis (Spot) - Prices broke above resistance in the 1375.16-77.33 area and completed a Bullish Engulfing candlestick pattern, hinting at further gains ahead. Initial resistance is at 1401.63, with a break above that targeting 1421.26. Alternatively, a reversal back beneath 1375.16 exposes 1340.31.

Commodities_Crude_Oil_Gold_Look_to_Fed-Speak_for_Direction_Cues_body_Picture_4.png, Crude Oil, Gold Look to Fed-Speak for Direction Cues

Daily Chart - Created Using FXCM Marketscope 2.0

Silver Technical Analysis (Spot) - Prices are testing support at 22.03, the 38.2% Fibonacci retracement. A break below that targets the 50% level at 21.17. Near-term resistance is at 23.10, the 23.6% Fib, with a turn back above that eyeing the April 26 high at 24.82.

Commodities_Crude_Oil_Gold_Look_to_Fed-Speak_for_Direction_Cues_body_Picture_5.png, Crude Oil, Gold Look to Fed-Speak for Direction Cues

Daily Chart - Created Using FXCM Marketscope 2.0

Copper Technical Analysis (COMEX E-Mini) - Prices may be carving out a Head and Shoulders (H&S) bottom chart formation. Confirmation is needed on a close above the pattern’s neckline, a barrier reinforced by the 61.8% Fibonacci retracement at 3.388. A break above that initially targets the 76.4% level at 3.469. Near-term support is at 3.322, the 50% Fib. If confirmed, the H&S setup implies an upside target at 3.781.

Commodities_Crude_Oil_Gold_Look_to_Fed-Speak_for_Direction_Cues_body_Picture_6.png, Crude Oil, Gold Look to Fed-Speak for Direction Cues

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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