Soft China Industrial Production Adds to Pressure from USD Strength
- Oil slashes after API reported stock build both nationally and at Cushing hub
- Gold stays range-bound while market positions for Fed’s rate plan
- Copper stabilizes ahead of 6-year low, digesting soft China’s industrial production
US dollar gained a leg up overnight as heavy selling of the EUR/USD pair triggered dollar demand in G10 pairs. This momentarily pushed down prices of commodities from gold to oil, copper. While gold generally recovers, oil stays low under pressure of excess supply and copper remains weak to demand woes after China’s Industrial production data missed forecast albeit slightly.
Gold swung around within the 1085.5-1095.8 range on a third day, with no sign for a breakout soon. The safe haven asset holds near a 3-month low at 1077.4 as market continues to work out chances of the Fed raising interest rate in December meeting. This is currently priced in at high probability of 66-68% via futures market.
Copper fell precariously close to a 6-year low at 2.2025 on a fourth day of steep declines. Dollar strength and uncertain global economic growth continue to weigh on prospective demand for the metal. Zinc closed at the lowest in six years yesterday. Industrial production in China casted more doubts on manufacturing activities in the country and ensuing demand for metals.
WTI oil twice tested a support level at 43.57 although the pace of decline has slowed down. Prices have gone down 1 percent after Asia noon time, following a stock build report by the American Petroleum Institute. The industry group recorded a 6.3 million barrels build overall, with over 5 million barrels at Cushing hub. The latter number effectively annuls recent short-lived optimism that two weeks of draws at the hub could be early signal of a supply shortage.
GOLD TECHNICAL ANALYSIS – Support at 1085.56 held through today as we expected. Gold traded in the new-found range of 1085.5 – 1095.8 after a steep drop from 1180s area last week. Daily momentum starts to pick up from the lower bound and affirms the consolidation. Although upside movement is limited, the gold bears may adjust their stops to trail current support in case sideway moves prolong.
15-minute Chart - Created Using FXCM Marketscope
COPPER TECHNICAL ANALYSIS – Copper lowered near 2.2025 support level and 6-year low. The metal may see repeated attempts to test support, especially as downside momentum persists. It is not clear whether this record low would be broken in due course. Copper bears could take hints from the resistant trend line as below to keep their stops going.
DailyChart - Created Using FXCM Marketscope
CRUDE OIL TECHNICAL ANALYSIS – The pace of decline in WTI oil price has eased as daily momentum nearly bottomed out. However there is no signs for a rebound and oil may still test the 42.58 support level before a possible pick-up. The oil bears should stay cautious of volatility near this level
Daily Chart - Created Using FXCM Marketscope
--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com
Contact and follow Nathalie on Twitter: @nathuynh
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.