Commodities - Energy

Crude Trades at Highest Levels in a Year, US Dollar Trend Remains in Focus

Crude Oil (WTI)     +$77.76     +$0.18     +0.23%
Crude prices have continued to push higher to trade just below $78/barrel, the highest in a year. A bit of event risk is on tap tomorrow with the Baker Hughes count of oil rigs operating in the US set for release against the backdrop of September’s Industrial Production data, which is expected to show that output grew just 0.2% in September, the lowest since June. Considering the number of working rigs has been rising for the past four months, the two metrics together may produce a picture of oversupply that could produce a pullback in crude prices. Third-quarter earnings from energy giant Halliburton may also produce an impact. However, no meaningful correction will be possible without a strong rebound in the US Dollar, whose sharp decline has been the dominant catalyst behind recent gains as traders look to crude as an inflation hedge. Technical positioning is broadly bullish, with prices clearly above significant resistance at the top of a rising channel and looking to the psychologically significant $80 level as the next major hurdle.

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Commodities - Metals

Metals Find Near-Term Support but Downward Pressure Remains Formidable

Gold      $1049.11     -$1.09     -0.10%
Gold has continued to diverge from oil prices, breaking below minor trend line support to pause ahead of the $1045 level. A survey of traders polled by Bloomberg showed that the metal may continue lower as the recent rally encourages profit-taking from speculators while driving away jewelry demand. A sustained break below $1040 will see little support emerging until prices meet resistance-turned-support at $1021. US equity index futures are pointing to a lower open on Wall St, suggesting risky assets may correct a bit a bit into the final day of the trading week and boost the safety-linked US Dollar, adding to downward pressure.

Silver     $17.34     -$0.01     -0.06%
The drop in silver has continued to outpace that of its more expensive counterpart, with prices now positioned above support-turned-resistance at the $17.28 level. A break lower leaves the door open for decline all the way to $16.75. As with gold (and all USD-denominated commodities, for that matter), equity futures positioning merits attention, hinting an upswing in the greenback could give silver just enough of a nudge to launch the next leg of a bearish correction.

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