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Crude Oil, Gold May Rebound on Euro Summit and Fed Minutes Hopes

Talking Points

  • Crude Oil, Copper May Rebound on EU FinMin Summit, Fed Minutes Outlook
  • Gold and Silver Have Room to Recover as Dollar Corrects, QE3 Hopes Return

Commodity prices are on the upswing as markets correct following Friday’s selloff in the wake of a disappointing US jobs report. Overnight data showing Chinese inflation slowed to a 29-month low at 2.2 percent is reinforcing support, hinting the world’s number-two economy and major raw materials consumer may have scope to ease monetary policy further after cutting rates last week.

Looking ahead, all eyes are on the Eurozone finance ministers’ summit set to get underway in Brussels today. The sit-down is expected to produce ratification of the operational details of Spain’s bank bailout effort and may produce a near-term bounce in assets geared to sentiment. Profit-taking on anti-risk positions with a view to the possibility that FOMC meeting minutes due to print on Wednesday may stoke QE3 expectations stands to reinforce this dynamic.

On balance, this opens the door for a larger recovery in growth-sensitive crude oil and copper prices. Meanwhile, gold and silver may find scope to rise as haven flows reverse out of the US Dollar while returning stimulus hopes boost inflation-hedge demand.

WTI Crude Oil (NY Close): $84.45 // -2.77 // -3.18%

Prices broke lower through resistance-turned-support at 85.50 after putting in a Shooting Star candlestick below the 90.00 figure. Sellers now aim to challenge the 82.10-81.19 area marked by the 23.6% Fibonacci expansion and a former range bottom, with a break below that exposing the 38.2% level at 77.83. The 85.50 level has been recast as resistance once again.

Crude_Oil_Gold_May_Rebound_on_Euro_Summit_and_Fed_Minutes_Hopes_body_Picture_3.png, Crude Oil, Gold May Rebound on Euro Summit and Fed Minutes Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1583.75 // -20.93 // -1.30%

Prices broke lower as expected after showing a bearish Evening Star candlestick pattern below falling trend line resistance set from late March. A breach of the 1600/oz figure, a psychological barrier reinforced by the 23.6% Fibonacci expansion, now sees bears challenging the 38.2% level at 1575.81. A break below that targets the 50% Fib at 1555.61. The 1600 level has been recast as near-term resistance.

Crude_Oil_Gold_May_Rebound_on_Euro_Summit_and_Fed_Minutes_Hopes_body_Picture_4.png, Crude Oil, Gold May Rebound on Euro Summit and Fed Minutes Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $27.11 // -0.56 // -2.02%

Prices are testing support is at 26.75, with a break below that exposing the multi-month triple bottom at 26.05. Near-term resistance is now 28.23-52 area at the intersecting of a falling trend line and former support at the bottom of a Flag chart formation.

Crude_Oil_Gold_May_Rebound_on_Euro_Summit_and_Fed_Minutes_Hopes_body_Picture_5.png, Crude Oil, Gold May Rebound on Euro Summit and Fed Minutes Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.410 // -0.084 // -2.40%

Prices took out support at 3.424 to expose the 23.6% Fibonacci expansion at 3.378. A break below this barrier exposes the 3.250-96 area marked by a major multi-month bottom and the 38.2% Fib. The 3.424 has been recast as minor resistance, with a break above that seeing trend line resistance at 3.490.

Crude_Oil_Gold_May_Rebound_on_Euro_Summit_and_Fed_Minutes_Hopes_body_Picture_6.png, Crude Oil, Gold May Rebound on Euro Summit and Fed Minutes Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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