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Copper Dips As China Data Disappoints, Gold Exposed To USD Recovery

Copper Dips As China Data Disappoints, Gold Exposed To USD Recovery

David de Ferranti, Currency Analyst

Talking Points

  • Copper pulls back from resistance following disappointing Chinese economic data
  • Gold and silver exposed to a strong upcoming US Retail Sales print
  • Crude oil continues to struggle below the $101 handle as supply glut concerns weigh on prices

Disappointing Chinese economic data has put pressure copper prices today, as traders weigh the potential for a slowdown in growth to crimp the Asian Giant’s appetite for base metals. Meanwhile, gold and silver’s recent recovery may be under threat from an upside surprise to upcoming US Retail Sales data via the US Dollar side of the equation. Similarly, continued concerns over a supply glut in the US oil market may weigh on crude oil prices as WTI struggles below the $101.00 handle.

Chinese Growth Concerns Crimp Copper Prices

Weaker-than-anticipated Chinese Retail Sales and Industrial Production figures for April have put pressure on copper prices during Asian trading. As a leading indicator for economic activity, the drop in Retail Sales growth to the lowest level since 2011 has likely fuelled further concerns over a potential slowdown in Chinese economic growth. Additionally, the 5th consecutive decline for the growth in industrial production represents a worrying trend, that if continued may lead to lower demand for commodities from the Asian giant. Further speculation over a deceleration in the country’s economic growth could leave copper vulnerable to a correction.

Copper Dips As China Data Disappoints, Gold Exposed To USD Recovery

US Dollar Recovery Threatens Gold Gains

Tensions in Eastern Europe remain on traders’ radars as the ongoing Ukrainian crisis continues to create safe-haven demand for gold and silver. While the latest developments in the region suggest a resolution at this stage remains unlikely, the absence of an escalation may leave gold vulnerable to renewed selling pressure.

In the session ahead the precious metalsmay find some additional guidance from US Advance Retail Sales figures, given an upside surprise may aid the US Dollar’s recent recovery. While we saw some anemic first quarter US GDP figures, recent improvements in leading indicators like Retail Sales and ISM Non-Manufacturing data hint at a recovery in the second quarter. Optimism about future growth prospects could lead traders to move out of US Treasuries, which would boost 10 year yields and offer some support to the greenback.

Crude Oil Supply Glut Keeps Gains Capped

WTI continues to struggle below the $101.00 handle which has acted as a ceiling for prices since the beginning of the month. The lift in other risk-sensitive instruments like US equity benchmarks has failed to put the wind in crude oil’s sails as a glut in US oil inventories suppresses prices. As noted in prior commodities updates; near-record levels for crude oil stocks and exponential growth in production casts a bearish shadow over crude oil. Expectations of a significant in lift in domestic demand would be required to change the overall outlook for the oil price.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil has broken below trendline support following the emergence of an Evening Star formation on the daily. Alongside building downside momentum (reflected by the rate of change indicator) and a move below the 20 SMA a bearish technical bias is offered. However, the daily close above the psychologically significant $100.00 handle suggests the potential for a short-term recovery which precludes new short positions at this stage. Sellers are likely to re-emerge at the 102.30 level of resistance.

Crude Oil: Waiting For Break Below $100 For New Shorts

Copper Dips As China Data Disappoints, Gold Exposed To USD Recovery

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Several Doji formations on the daily suggest hesitation from the bears as gold teases at a push below critical support at $1,277. With volatility remaining low (as reflected on the ATR), the current environment may favor range-trading setups, which is further supported by a lack of momentum signaled by the Rate of Change indicator.

The DailyFX Speculative Sentiment Index suggests a mixed bias for gold based on trader positioning.

Gold: Dojis Highlight Trader Indecision

Copper Dips As China Data Disappoints, Gold Exposed To USD Recovery

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

A Doji on the daily chart for silver denotes trader indecision near the all-important $19.00 handle. While there are warnings of a potential reversal in the trend, notable selling pressure near $19.70 may continue to cap gains for the precious metal. Additionally, low levels of volatility suggested by the ATR alongside fading downside momentum also hint at a more range-bound market environment for the precious metal.

Silver: $19.00 Handle Remains Critical Support…. For Now

Copper Dips As China Data Disappoints, Gold Exposed To USD Recovery

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

Copper has vaulted above its descending trendline from the 2014 high and cleared a notable resistance level at $3.085. With building upside momentum (as suggested by the rate of change indicator) and prices above the 20 SMA a bullish technical bias is offered. A break above the $3.149 mark would open an extended advance on the $3.213 (the 61.8% Fib Retracement level).

Copper: Aims Higher Following Bullish Technical Signals

Copper Dips As China Data Disappoints, Gold Exposed To USD Recovery

Daily Chart - Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

Palladium prices are being squeezed between trendline support and resistance near the 2014 high at $815. This puts the precious metal at a critical juncture. A break below the ascending trend channel would support a bearish bias with a target offered by the $777 mark.

Palladium: Price Compression Leaves Prices Poised For A Break

Copper Dips As China Data Disappoints, Gold Exposed To USD Recovery

Daily Chart - Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

Platinum continues to be supported above the $1,427 mark as upside momentum (as reflected by the rate of change indicator) begins to build. Recent price action has failed to confirm the Evening Star formation, and as such a bounce back to trendline resistance may be on the cards.

Platinum: Pushes Back Towards Trendline Resistance

Copper Dips As China Data Disappoints, Gold Exposed To USD Recovery

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

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Contact and follow David on Twitter: @DaviddeFe

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

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