Crude Oil and Copper Stabilize As China Demand Concerns Ease

Talking Points

• Crude oil and copper stabilize as China demand concerns abate
• Goldtreads water as traders weigh geopolitical concerns against a USD recovery
• Bearish technical signals on WTI warn of further declines

Crude oil has stabilised above the $101.00 mark in Asian trading today following a steep decline during trading on Monday that was mirrored in growth-sensitive commodities like copper. Meanwhile, gold continues to waver around the $1,340 level with newswires pointing to ongoing Ukrainian tensions as a possible source of support for the precious metal.

Chinese Demand Concerns Ease

A disappointing set of Chinese trade balance figures released over the weekend weighed on the commodities space on Monday. Copper touched the lowest level in more than two years, while crude oil fell below the $102.00 handle. Following the initial drop in the growth-sensitive commodities there appears to be some signs of stabilisation in Asian trading today as concerns over chinese demand ease.

While investor sentiment is still vulnerable to fresh negative news-flow, a light economic docket in the session ahead is unlikely to offer a catalyst to spark the same sort of magnitude of declines for copper and crude oil that was witnessed on Monday. While event-risk may be lacking, speculative positioning amongst WTI traders stands at a record number of net long positions signalling the potential for a sharp correction for oil.

Gold Faces Mixed Cues

Gold is treading water around the $1,340 level as traders weigh conflicting signals for the precious metal. On the one hand; ongoing geopolitical tensions in Eastern Europe have likely offered support for commodity. While on the other, broad US Dollar strength may have weighed on the fiat-money alternative.

While uncertainty surrounding the Ukrainian-Russian conflict remains on traders’ radars, in the absence of a flare-up, the US Dollar may take the reigns as the dominant driver for the precious metal over the remainder of the week. The economic calendar highlights several pieces of noteworthy event risk including theUS UofM Consumer Confidencefigures and the confirmation hearing for Fed Officials Fischer, Brainard, and Powell. An improvement in US economic data and pro-”taper” talk from the aforementioned Fed speakers would likely aid a greenback recovery and weigh on the precious metals space.

CRUDE OIL TECHNICAL ANALYSIS – Crude oil is exhibiting signs of a downtrend as prices have moved below their 20 SMA. This follows on from a Dark Cloud Cover formation on the daily that warned of declines ahead. Additionally, the rate of change indicator has shifted into negative territory, signaling building downside momentum. Following the daily close back below the $102.00 level a bearish bias is offered with an initial downside target of the psychologically significant $100.00 mark.

Daily Chart - Created Using FXCM Marketscope 2.0

NATURAL GAS TECHNICAL ANALYSIS – Buyers remain prepared to support the natural gas price at the 4.450 mark as the commodity stabilizes following dramatic declines at the end of February. With the 20 SMA signaling a downtrend, a corrective bounce at this stage would be seen as an opportunity to enter new short positions. Resistance is likely looming at former support near 4.917 (the 61.8% Fib Retracement level).

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS – We remain on the lookout for a shift to a downtrend for gold on the daily. With resistance at 1,351 keeping the bulls in their pens for the time-being, further near-term gains look like a bit of a stretch. The emergence of a Dark Cloud Cover formation is a warning signal, however it would be too soon to suggest a bearish reversal given prices remain within their upward trend channel and above the 20 SMA.

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS – A downtrend has emerged for silver signaled by the 20 SMA and ROC indicator. Shorts are preferred on a break below former resistance-turned-support at $20.50, which would open up the prior range-low at $19.00.

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS– Following a dramatic plunge in copper prices over the past few trading sessions, buyers appear to be emerging at the $3.030 level. Against the backdrop of a continued downtrend, a bearish bias is retained and a corrective bounce would be seen as an opportunity to enter new short positions.

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by David de Ferranti, Market Analyst, FXCM Australia

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