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Commodities: Oil, Gold May Rebound if US Data Supports QE Taper Delay

Commodities: Oil, Gold May Rebound if US Data Supports QE Taper Delay

2013-10-29 12:03:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • Crude Oil, Metals Under Pressure as US Dollar Launches Overnight Recovery
  • Flat S&P 500 Futures Leave Room for Shift in Risk Trends, US Data in Focus
  • Post-FOMC Volatility Risk May be Tilting in Favor of Lower Commodity Prices

An overnight recovery in the US Dollar is weighing against commodity prices in European trade.S&P 500 futures are notably flat however, hinting the door remains open for a reversal in underlying risk sentiment trends as markets wait for key data points from the US to set the stage for Wednesday’s much-anticipated FOMC policy announcement.

Retail Sales and Consumer Confidence reports are on tap, with draw-downs expected on both fronts. This may help fuel expectations that the Fed will wait longer to begin “tapering” the size of its QE3 stimulus program. That is likely toboost risk-geared commodities including crude oil and copper. It likewise bodes well for gold and silver as the prospect of longer-lasting stimulus weighs on the greenback anew and boosts anti-fiat demand.

Importantly, markets have been pricing in a delay in policy normalization for some weeks. That means any outsized volatility in the aftermath of this week’s FOMC outingwilllikely come from anything perceived as borderline hawkish in the context of the shift in market expectations. Status-quo verbiage that falls short of an overtly dovish tone adjustment may be seen as just such a development, meaning any “risk-on” push in the near term could have a short shelf-life.

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

CRUDE OIL TECHNICAL ANALYSIS Prices rose as expected after putting in a bullish Morning Star candlestick pattern at the bottom of a falling channel set from late August. Near-term resistance is at 99.77, the 23.6% Fibonacci retracement, with a break above that targeting the channel top at 101.32. Channel bottom support is now at 96.07.

Commodities_Oil_Gold_May_Rebound_if_US_Data_Supports_QE_Taper_Delay_body_Picture_3.png, Commodities: Oil, Gold May Rebound if US Data Supports QE Taper Delay

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS Prices broke higher as expected after putting in a bullish Morning Star candlestick pattern. Resistance is now at 1364.06, the 61.8% Fibonacci retracement, with a break above that targeting the 76.4% level at 1390.64. Near-term support is at 1342.57, the 50% Fib. A reversal back beneath that eyes the 38.2% Fib at 1321.09.

Commodities_Oil_Gold_May_Rebound_if_US_Data_Supports_QE_Taper_Delay_body_Picture_4.png, Commodities: Oil, Gold May Rebound if US Data Supports QE Taper Delay

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS Prices are testing resistance at 22.80, the 50% Fibonacci retracement. A break higher targets the 61.8% level at 23.34. Near-term support is at 22.25, the 23.6% Fib, with a move beneath that eyeing the 23.6% retracement at 21.58.

Commodities_Oil_Gold_May_Rebound_if_US_Data_Supports_QE_Taper_Delay_body_Picture_5.png, Commodities: Oil, Gold May Rebound if US Data Supports QE Taper Delay

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS Prices are consolidating in a Triangle chart pattern, a setup hinting at bullish continuation in this instance. A break above the formation’s top (3.337) initially targets 3.378. Alternatively, a reversal through Triangle support (3.232) aims for swing lows in the 3.190-233 area.

Commodities_Oil_Gold_May_Rebound_if_US_Data_Supports_QE_Taper_Delay_body_Picture_6.png, Commodities: Oil, Gold May Rebound if US Data Supports QE Taper Delay

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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