- Oil recovered after stripping off 2-day gains, hurricane Joaquin adds volatility
- Copper weak to equities sell-off and mixed economic data globally
- Gold fragile to downside risk of Non-farm Payrolls, given tepid US data
The highly anticipated US Non-farm Payrolls (NFP) data today would no doubt inject more volatility to a market that is already unstable from equity swings, mix-bag global economic data, with one foot in and one foot out of rate hike case. Economists suggest that any downside risk of NFP would likely stir more reactions than upside gain. Hence commodities investors may take caution with support levels.
Oil has steadily recovered in Asia trade as regional equities followed S&P on a rebound. While China market closes, the Hang Seng index gained 2.7 percent by noon, while Treasuries and Aussie government bonds retreated.
Hurricane Joaquin has intensified to extremely dangerous category over the Bahamas and could possibly head to the Gulf of Mexico, a major crude production region. However the potential supply damages could be offset by demand damages as it hurt energy demand and prompt refinery shutdowns.
WTI oil initially rose to a high at 47.10 on the news, additional to China’s reassuring Purchasing Manager’s Index and decreasing production globally (reported yesterday). However it quickly crashed to 44.63 along with a flight out of European and US equities.
Despite the overnight swings, oil prices stayed snuggly within the 44.15-47.64 range of September correction and/or technical Fibonacci levels. Investors may keep a close watch of the lower bound during Non-farm payrolls release to preserve capital.
Copper gave back all of previous session’s gains to stay below 2.3185 resistance for the second time, led by equities loss and an unimpressive US manufacturing PMI for September. The metal mostly followed fickle risk-on, risk-off sentiments this week, with downward pressure from insipid economic data globally.
US NFP today and reaction in equities market will likely be the main driver to copper prices. Prices have moved quite predictably on an intraday basis (please refer to chart below), with support levels at 2.2970 then 2.2695.
Gold continually weakened ahead of Non-farm Payrolls data and headed for the biggest weekly loss since July. This jobs gauge will shed light on the strength of the US economy and subsequently chances of the Federal Reserve raising interest rate this year.
Global data preceding today event were lukewarm with China’s Purchasing Manager’s Index at 3-year low and Eurozone’s inflation lackluster. Large swings in global equities and the unwinding of some market correlations complicated the picture further. Any breakout on the downside of gold will test support levels at 1109.28 then 1098.8, before it finds more leeway to descend towards the July-August trough around 1080.
GOLD TECHNICAL ANALYSIS – Gold stayed stagnant near a support level at 1109.28 coming up to the highly anticipated NFP. As with oil and copper, any downside risk prompted by the data would be of more concern to gold investors than upside potential. Holders of gold long positions should keep stops tight around a support area of 1098.8-1109.2. Outside of this week’s developments, gold remains sensitive to any indicators related to chances of a 2015 US rate hike, which may present opportunities for range trading.
Daily Chart - Created Using FXCM Marketscope
COPPER TECHNICAL ANALYSIS – Copper gave back all of yesterday’s gains as it touched down on 2.2970 support level. Its lackluster recovery during the Asian morning was capped by a resistance level at 2.3185. US data tonight poses potential downside risk to copper and investors should keep a close watch of support levels at 2.2970 then 2.2695. On a daily basis, the metal remained largely in range under 23.6% Fibo at 2.3775.
15-minute Chart - Created Using FXCM Marketscope
CRUDE OIL TECHNICAL ANALYSIS – WTI oil reversed sharply after it nearly touched an upper bound of September correction, the 38.2% Fibo at 47.21. As such, oil is now contained within the range which could benefit range trades despite volatile swings. The long-term oil bulls should be cautious of downside risk from any test of 23.6% Fibo and support at 43.59.
Daily Chart - Created Using FXCM Marketscope
--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com
Contact and follow Nathalie on Twitter: @nathuynh