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Crude Oil, Gold Set Sights on US Consumer Confidence Data

Crude Oil, Gold Set Sights on US Consumer Confidence Data

Ilya Spivak, Head Strategist, APAC

Commodities look to May’s US Consumer Confidence report to inform the evolving relationship between economic news-flow and risk appetite trends.

Talking Points

  • Crude Oil and Copper Look to US Confidence Data to Guide Risk Appetite Trends
  • Gold, Silver May Fall if Consumer Sentiment Data Feeds Fed QE Reduction Bets

Cycle-sensitive crude oil and copper prices are trading cautiously higher amid a broad-based recovery in risk appetite. A quiet European economic calendar shifts the spotlight to May’s US Consumer Confidence report, where sentiment is expected to print at the highest in six months.

S&P 500 index futures are trading firmly higher ahead of the figure despite its presumed implications for a speedier reduction in Fed stimulus provision, which only last week seemed to unnerve investors. With that in mind it will be curious to watch traders’ reaction once the outcome crosses the wiresas a benchmark for the markets’ preferred interpretation take on the US business cycle

If markets opt to view an improvement in consumer sentiment through in terms of its implications for stimulus, a stronger outcome may undermine risk appetite and weigh on shares along with crude oil and copper. Alternatively, if investors read such an outcome in terms of the supportive role a stronger US recovery would play in underpinning global growth, the opposite result can be expected.

The likely response to stronger US data from the precious metals space seems a bit less ambiguous. An increasingly firm link between the US Dollar and the 10-year US Treasury bond yield suggests a supportive outcome that bolsters bets on a near-term reduction in the size of QE purchases will boost the greenback. This in turn seems likely to weigh on gold and silver amid ebbing anti-fiat demand.

Crude Oil Technical Analysis (WTI) - Prices moved lower as expected after putting in a bearish Dark Cloud Cover candlestick pattern. Sellers are now testing support at 93.55, the 38.2% Fibonacci expansion, with a break lower exposing the 23.6% level at 92.23. Near-term resistance is at 94.61, the 50% Fib. A reversal above that eyes the 61.8% expansion at 95.68.

Commodities_Crude_Oil_Gold_Set_Sights_on_US_Consumer_Confidence_Data_body_Picture_3.png, Crude Oil, Gold Set Sights on US Consumer Confidence Data

Daily Chart - Created Using FXCM Marketscope 2.0

Gold Technical Analysis (Spot) - Prices completed a Bullish Engulfing candlestick pattern above support at 1348.97, the 38.2% Fibonacci retracement level, hinting at gains ahead. Initial resistance is at 1402.11, the 23.6% level, with a break above that targeting the 14.6% Fib at 1434.86 and the May 3 high at 1488.00. Alternatively, a move below support eyes the 50% expansion at 1306.02.

Commodities_Crude_Oil_Gold_Set_Sights_on_US_Consumer_Confidence_Data_body_Picture_4.png, Crude Oil, Gold Set Sights on US Consumer Confidence Data

Daily Chart - Created Using FXCM Marketscope 2.0

Silver Technical Analysis (Spot) - Prices continue to consolidate above 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_Set_Sights_on_US_Consumer_Confidence_Data_body_Picture_5.png, Crude Oil, Gold Set Sights on US Consumer Confidence Data

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 3.256, the 38.2% Fib.

Commodities_Crude_Oil_Gold_Set_Sights_on_US_Consumer_Confidence_Data_body_Picture_6.png, Crude Oil, Gold Set Sights on US Consumer Confidence Data

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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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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