Gold Prices May Turn Lower Anew on Pro-Taper Fed Commentary
- Hawkish Fed-Speak May Overshadow a Slowdown in US Retail Sales
- Gold May Turn Lower if Plosser, Fisher Talk Up “Tapering” Fed QE
- Crude Oil Breaks November Low But Near-Term Outlook is Clouded
“Fed-speak” remains in focus today. Yesterday’s hawkish remarks from Atlanta Fed President Dennis Lockhart failed to prevent a breakdown of the US Dollar, allowing gold to continue building upward. A similar tone from today’s remarks by Charles Plosser and Richard Fisher – presidents of the Philadelphia and Dallas Fed branches respectively – may carry a bit of added weight however. Unlike Lockhart, both are voting members of the rate-setting FOMC committee in 2014, so remarks supportive of continued tapering of QE asset purchases may offer a lifeline to the greenback and weigh on precious metals.
On the data front, traders will be watching December’s US Retail Sales report. Economists’ forecasts point to a 0.1 percent increase from November, marking the softest outcome in three months. While a slowdown in retail activity during a holiday-heavy month of the year doesn’t bode well, the release may not generate a lasting response in and of itself.
Many of the arguments made to explain December’s miss on nonfarm payrolls – especially those of the weather-related variety – can be applied to a drop in receipts growth as well. With that in mind, a slowdown won’t necessarily offer anything new into the conversation and may be overshadowed by the aforementioned commentary from Fed officials if they opt for a hawkish lean.
Meanwhile, crude oil traded lower yesterday as expected, moving downward alongside the S&P 500. The correlation between the WTI contract and the benchmark stock index now stands at the highest in seven weeks (0.54 on 20-day percent change studies), hinting prices are likely to continue following broad-based sentiment trends. Where that might take crude today is somewhat unclear however, with US stock index futures flat ahead of the opening bell on Wall Street.
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CRUDE OIL TECHNICAL ANALYSIS – Prices fell as expected after putting in a Bearish Engulfing candlestick pattern. A break below 91.74 – the November 27 swing low – has exposed the 50% Fibonacci expansion at 90.50. A further push beneath that aims for the 61.8% level at 88.08. Reversing back above 91.74 and the 38.2% Fib at 92.91 aims for the 23.6% expansion at 95.90.
GOLD TECHNICAL ANALYSIS – Prices turned higher as expected after putting in a Harami candlestick pattern. A break above resistance at 1248.70, the 38.2% Fibonacci expansion, has exposed the 1261.28-70.28 area (marked by bracketed by the October 11 swing low and the 50% level). A further push beyond that targets the 61.8% Fib at 1291.86. Turning back below 1248.70 aims for the 23.6% retracement at 1222.01.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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