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Commodity Prices Pressured as Markets Mull Fed Policy Outlook

Commodity Prices Pressured as Markets Mull Fed Policy Outlook

Ilya Spivak, Head Strategist, APAC

Commodity prices came under pressure as financial markets mulled the implications of a Fed move to slim down its QE stimulus effort next month.

Talking Points

  • Commodities Under Pressure as Markets Mull Fed QE “Taper” Possibilities
  • Metals Reverse from Chart Resistance, Oil Pullback Still Looks Corrective

Commodity prices are moving lower along with European share prices, following selloffs on US and Asian bourses as speculation about the Fed’s intent to reduce its QE effort heats up before Wednesday’s publication of minutes from July’s FOMC meeting. Traders fear the outing will confirm the beginning of the so-called “tapering” of asset purchases will begin in September.

Benchmark 10-year Treasury yields soared to the highest in two years, emerging-market assets tumbled and the sentiment-sensitive Australian and New Zealand Dollars underperformed in the G10 FX space. Not surprisingly, crude oil and copper followed suit, following the risky asset complex downward. Gold and silver came under pressure as well, although losses were not as pronounced as might have been expected from the anti-fiat contingent given a “taper-on” market dynamic.

The economic calendar is quiet in US trading hours, hinting little stands in the way to derail established momentum. Indeed, S&P 500 futures are trading lower ahead of the opening bell on North America, hinting at more of the same as Wall Street comes online.

Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index.

CRUDE OIL TECHNICAL ANALYSIS Prices completed a Flag chart pattern, a setup indicative of bullish continuation. A pullback from initial resistance at 108.40, the 38.2% Fibonacci expansion, sees initial support at the broken Flag top (now at 106.45). A move back below that targets rising trend line support at 104.58. Alternatively, a renewed push higher above 108.40 aims for the 50% level 110.32.

Commodity_Prices_Pressured_as_Markets_Mull_Fed_Policy_Outlook_body_Picture_3.png, Commodity Prices Pressured as Markets Mull Fed Policy Outlook

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS Prices put in a bearish Dark Cloud Cover candlestick pattern below resistance at 1376.28, the 61.8% Fibonacci expansion. Near-term support is at 1356.22, the 50% Fib, with a break beneath that targeting the 38.2% level at 1336.76. Alternatively, a reversal above 1376.28 aims for the 76.4% expansion at 1400.72.

Commodity_Prices_Pressured_as_Markets_Mull_Fed_Policy_Outlook_body_Picture_4.png, Commodity Prices Pressured as Markets Mull Fed Policy Outlook

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS Prices recoiled downward from support-turned-resistance at a falling trend line set from November 2012 to retest the 23.6% Fibonacci retracement at 22.25. A break below that aims for the 14.6% level at 20.70. Alternatively, a reversal above the trend line (now at 23.23) exposes the 38.2% Fib at 24.75.

Commodity_Prices_Pressured_as_Markets_Mull_Fed_Policy_Outlook_body_Picture_5.png, Commodity Prices Pressured as Markets Mull Fed Policy Outlook

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSISPrices are pulling back from triple-top resistance at 3.378, a barrier reinforced by the 138.2% Fibonacci expansion at 3.381. Near-term support is at 3.286, the 23.6% Fib retracement, with a break below that targeting the 38.2% level at 3.228. Alternatively, a reversal above 3.381 aims for the 150% expansion at 3.410.

Commodity_Prices_Pressured_as_Markets_Mull_Fed_Policy_Outlook_body_Picture_6.png, Commodity Prices Pressured as Markets Mull Fed Policy Outlook

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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