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Commodities: Crude Oil May Rise as Markets Steady After FOMC Minutes

Commodities: Crude Oil May Rise as Markets Steady After FOMC Minutes

Ilya Spivak, Head Strategist, APAC

Crude oil may rise along with a broad recovery in risk appetite as financial markets continue to digest yesterday’s FOMC minutes release.

Talking Points

  • Crude Oil, Copper May Correct Higher as Risk Trends Steady After FOMC Minutes
  • Gold Technical Positioning Hints Prices May be Carving Out a Top Below $1400/oz

Commodity prices are on the upswing in European trade. Risk aversion noted in US and Asian hours in the wake of July's FOMC minutes seems to have receded, with markets likely settling on the idea that the release merely confirmed a status quo that was already well-known (i.e. that the Fed will taper in small size - perhaps about $10 billion - at the September meeting). Broadly supportive PMI readings from the Eurozone and China are likewise helping to underpin sentiment.

From here, the spotlight will shift to the Fed's Jackson Hole Economic Summit. The four-day symposium features an appearance from Janet Yellen, currently the Fed’s Vice Chair and one of the leading candidates to replace Ben Bernanke when his tenure ends in January 2014. If Yellen is indeed chosen to take the reins next year, it will be up to her to manage the Fed’s move toward monetary policy normalization. With that in mind, traders will be keen to hear what she has to say on the matter of QE reduction.

S&P 500 futures are pointing cautiously higher ahead of the opening bell in North America, hinting at a risk-on mood as Wall Street comes online. That points the way higher for cycle-linked crude oil and copper prices. If a more sober re-evaluation of yesterday’s FOMC minutes release is indeed the primary driver now underpinning risk trends, gold and silver ought to advance as well. With that said, markets remain very headline-sensitive, leaving assets vulnerable to sudden changes in sentiment.

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

CRUDE OIL TECHNICAL ANALYSIS Prices pulled back after putting in a Bearish Engulfing candlestick pattern, taking out the bottom of a Triangle chart pattern to expose the 38.2% Fibonacci retracement at 102.70. A further push beneath that eyes the 50% level at 100.79. Alternatively, a turn back above the Triangle top (now at 104.80) aims for the formation’s upper boundary at 108.05.

Commodities_Crude_Oil_May_Rise_as_Markets_Steady_After_FOMC_Minutes_body_Picture_3.png, Commodities: Crude Oil May Rise as Markets Steady After FOMC Minutes

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, hinting a reversal lower may be ahead. Negative RSI divergence bolsters the case for a downside scenario. 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.

Commodities_Crude_Oil_May_Rise_as_Markets_Steady_After_FOMC_Minutes_body_Picture_4.png, Commodities: Crude Oil May Rise as Markets Steady After FOMC Minutes

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 23.15) exposes the 38.2% Fib at 24.75.

Commodities_Crude_Oil_May_Rise_as_Markets_Steady_After_FOMC_Minutes_body_Picture_5.png, Commodities: Crude Oil May Rise as Markets Steady After FOMC Minutes

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSISPrices are rebounding from support at 3.286, the 23.6%Fibonacci retracement, with the bulls eyeing triple-top resistance at 3.378 anew. This barrier is reinforced by the 23.6% Fib expansion at 3.379. A break upward initially targets the 38.2% expansion at 3.437. Alternatively, a reversal below support aims for the 38.2% retracement at 3.228.

Commodities_Crude_Oil_May_Rise_as_Markets_Steady_After_FOMC_Minutes_body_Picture_6.png, Commodities: Crude Oil May Rise as Markets Steady After FOMC Minutes

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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