Crude Oil, Copper Find Support as Chinese Equities Rebound

2015-07-10 05:03:00

Nathalie Huynh, Contributor

Talking Points:

Copper prices rallied as government actions boosted Chinese stocks
Crude oil held on to gains on deadlock in Iran sanctions negotiations
Gold prices steadied as economic, political risks continue to linger

Copper rose as much as 0.33 percent today after Chinese stocks rebounded following recent losses. The Shanghai Composite scored an upswing of nearly 5 percent today, following on from a 5.7 percent gain yesterday. Weakness in industrial metals may persist however as Greek debt woes remain unresolved and worries about China persist. Looking ahead, the outlook is likely to depend on how much damage the recent stock rout has done to broader sentiment in China and how long the current recovery will last. In the meantime, copper may test resistance at the 20-day moving average before the week-end.

Crude oil prices continued to rise for a second day after a 2.2 percent gain yesterday amid signs that Iran and six Western powers may miss another deadline to seal a nuclear deal allowing the Islamic Republic to boost oil exports. An agreement would need to be established by Friday morning in Vienna in order to facilitate a 30-day review in the US Congress. Asia-session price action has been subdued near yesterday’s high of 53.51. Looking ahead, US rig count data from Baker Hughes as well as the monthly EIA oil market report are in focus.

Gold has held above its three-month low and gained up to 0.25 percent in Asia trade so far as risks from China and Greece weighed on market sentiment and lowered expectation for higher US interest rates. A decline in the US Dollar Index today has also helped to put in a floor for prices. The rebound is a long way from erasing a 0.7 percent decline recorded throughout this week however. Appetite for gold as a safe asset may fade as Chinese equities continue to recover and Greek negotiations progress. All eyes are now on an EU summit on Sunday where officials will discuss Greece’s latest bailout proposals.

GOLD TECHNICAL ANALYSIS – Gold was down earlier in today’s trade before settling into a range just above support at 1156.90. Intraday momentum signals point to upside developments, hinting a rebound may occur during the day. Topside resistance comes at yesterday’s high of 1167.70, followed by a double top at 1174.70.

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper continued the rise towards a resistance marked by the 20-day moving average, now at 2.592. Upward momentum is still present and we may see another test of resistance ahead. A break of the 20-day moving average would be bad news for the resumption of the recent downtrend. Support is likely at yesterday’s low of 2.4860 today.

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – WTI crude oil is heading higher towards yesterday’s high and resistance at 53.51 intraday. It is questionable whether prices can reach resistance or initiate a break with momentum signals near their upper bound however. Still, today’s focus is on the upside and as such, downward developments are likely to be limited.