Crude Oil and Gold Bounce With NFP Data To Offer Further Guidance

Talking Points

• Crude oil bounces near $100.00 level with profit-taking a likely contributor
• Gold and silver strengthen as US Dollar flounders
• Upside NFP surprise may strengthen the greenback and weigh on the precious metals

Crude oil has climbed back towards the $102.00 handle alongside gains in gold and silver, as profit-taking on short positions and a weakening of the US Dollar has likely benefited the commodities space. An upside surprise to the looming US NFP figures may support further gains for WTI, while implications for a stronger greenback may weigh on the precious metals.

Crude Bounces Near Key $100.00 Level

Crude oil reclaimed lost ground overnight as a test of the psychologically-significant $100.00 level likely prompted profit-taking among traders, which follows a period of steep declines for the commodity. While newswires attributed part of the rally to better-than-anticipated US jobless claims figures, the gains occurred several hours after the data was released.

Precious Metals Gain As Greenback Weakens

Gold and silver strengthened during recent trading as broad-based US Dollar weakness likely benefited the precious metals. Positive investor sentiment, reflected by a rise in the equities space, likely sapped demand for the safe-haven currency.Traders were also likely drawn away from the USD following an upbeat growth forecast from the ECB Governing Council and encouraging economic data from Australia.

Commodities Look To Upcoming Jobs Data for Cues

February’s US Non-Farm Payrolls figures due in the coming session hold significance for the commodities space from both a risk-trends perspective and for Fed policy implications. A turnaround in US economic data may help firm Fed “tapering” expectations and aid a greenback recovery, which in turn would likely weigh on gold and silver.

While we’re yet to see the turning point for the USD, an upside surprise to the jobs data may yet tip the scales in the reserve-currency’s favour. However, a better-than-expected print would also be bullish for US economic growth and may bolster risk-appetite and benefit growth-sensitive commodities like crude oil and copper. There is also a possibility that a drive towards yield-plays may actually weaken the greenback, which may support gold and silver.

CRUDE OIL TECHNICAL ANALYSIS – Crude’s recent turnaround has negated several previously bullish technical signals for the commodity. Prices have broken below the 20 SMA and trendline support suggesting a shift to a downtrend. Additionally, A Dark Cloud Cover candlestick pattern on the daily has received confirmation via successive down day. Combined with a break below buying support at the psychologically-significant $102.00 level (also the 23.6% Fib Retracement mark), we are left with a bearish technical bias for WTI.

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 last week’s dramatic declines. 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 – The uptrend is showing signs of fading momentum as the rate of change indicator ticks towards the 0 mark. 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. 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 – The 21.50 mark continues to act as important resistance for silver as the bulls struggle to charge further. The rate of change indicator has slipped into negative territory, suggesting that downside momentum is building and a trend shift looks likely to emerge for the precious metal. Buyers are likely to emerge at the psychologically significant 21.00 handle.

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS– Traders are likely to continue to watch the $3.235 resistance level which may act to cap further gains for copper. With prices below their 20 SMA and a negative reading from the rate of change indicator, there is a suggestion that the bears are likely to return. Thus an upside bounce may 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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