Talking Points:

  • Gold pared yesterday’s gains as risk revitalized following strong US data
  • Oil traded heavy after API published large crude build for the week
  • Copper rose with risk, supported by hopes of new stimulus in China

Strong U.S. data turned the table overnight to risk-positive with higher ISM manufacturing, construction spending and auto sales. The recovery of US dollar, equities, and oil subsequently pushed gold and safe haven JPY lower.

Gold priceretreated below 1230 by Asia afternoon with chances of yet lower moves, nearly gave back all of yesterday’s gains. Risk recovery rapidly gathers strength across Asian stock exchanges and AUD while gold fades into the background. Shanghai Composite, Australia ASX and Hang Seng each jumped over 2 percent, with Nikkei up 4.2 percent. U.S. Non-farm Payrolls later this week poses another threat to gold price with jobs gain expected.

Copper price and the metals complex traded positive together with equities. Hopes of China stimulus resurfaced in Asia Pacific and likely keep metals up for some time, after a 5-month low Caixin China manufacturing PMI. The government has implemented a number of reforms although mostly financial related, least with an RRR cut this week. Australia fourth-quarter GDP came out a 3 percent strong today, reflecting resilience in commodity-producing economies in the face of low prices.

Oil price is the only commodity experiencing outflows among renewed risk-on positions. Weekly inventory record from American Petroleum Institute showed a large build of 9.9 million barrels, almost threefold the forecasted volume. Oil is trading subdued near a past level at 33.84 and a descent below this would spell trouble for the oil bulls.

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GOLD TECHNICAL ANALYSIS – Gold price cooled down for the second session concurrent to a rush into risk assets. Uptrend signal is still unconfirmed, whereas the downside of gold remains limited with support trend line holding firmly underneath. It is well contained in a consolidation range.

Copper Rises with Risk while Oil Bucks the Trend amid Large Build

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price broke 2.1485 resistance level to reach up to trend line today. Although it is not expected to cross above the trend line soon, this effectively thwarts chances of a double top at 2.1485 and ensuing downward reversal. Upward momentum could be a leading indicator for short term traders.

Copper Rises with Risk while Oil Bucks the Trend amid Large Build

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS Oil price failed to break above 34.25 resistance yesterday, and price is contained at lower side of the level today. Too many sessions below resistance will make it a tough level to crack while increase chances of a double top. Fair chance for extensions in either direction for the rest of today.

Copper Rises with Risk while Oil Bucks the Trend amid Large Build

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com

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Contact and follow Nathalie on Twitter: @nathuynh