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Commodities Bounce as USD Unwinds though Copper Pressured by Glut

Commodities Bounce as USD Unwinds though Copper Pressured by Glut

Nathalie Huynh,

Talking Points:

  • Gold climbed higher as arbitrage window closes on Fed rate rise
  • Oil edged up before contract expiry, global glut persists albeit demand by refiners
  • Solid supply retains pressure on copper prices

Goldcontinued to climb after yesterday’s pick-up, as position adjustments took over the market and investors took profit on USD long. Arbitrage opportunities has diminished, now that provision for a Fed’s December rate hike is concrete. October meeting minutes and a series of Fedspeak sent this message across. Vice Chair Fischer spoke in the early morning Asia that the Fed had sufficiently prepared the market and other central banks for a rate rise.

WTI oil edged up amid volatility ahead of November futures contract expiry today, although inventory build looms large. Oil still heads for a 3rd weekly decline, even as crude consumption gains traction from rising refining margins for gasoline. The range between 6-year low 39.22 and a recent trough at 42.58 will likely contain price action. Lower moves remain on the radar while market contemplates additional output from Iraq and Iran.

Copper bounced back for the first time today since its downward spiral started on November 5. The output cuts this summer have made little impact to metal prices or the worldwide supply glut. December has always been a highly liquid month for options on the London Metal Exchange and bets on copper price slump may contribute to downward pressure.

Copper surplus has been persistent this year, as opposed to a deficit during the last year, according to data from the World Bureau of Metal Statistic:

Commodities Bounce as USD Unwinds though Copper Pressured by Glut

GOLD TECHNICAL ANALYSIS – Gold sets for a third day of rebound from the recent 5-year low, as momentum signals display clear upward bias. A resistance to watch out for is 1098.8 which held through the declines in early November. It was previously a support level during the September trough.

Commodities Bounce as USD Unwinds though Copper Pressured by Glut

Daily chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price has been contained above short term support at 2.0650 since November 17. This support level is unlikely to give way coming to the weekend, in absence of market moving events. The bears may adjust their stops to follow this level, although there is very slim chance for any rebound up to resistance at 2.2025.

Commodities Bounce as USD Unwinds though Copper Pressured by Glut

15-minuteChart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil is on a 6th day of consolidation within the range of 40.07-42.58. The topside resistance is just as sticky as the downside support, in spite of an upward bias in daily momentum. This upward momentum will likely hold prices firmly in range. Apart from that, there is not yet directional signal for next week.

Commodities Bounce as USD Unwinds though Copper Pressured by Glut

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.

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