Crude Oil Slammed As Chinese Demand Concerns Rekindled By Data Slump

Talking Points

• Crude Slammed As China Data Slump Overshadows Russia Sanctions
• Gold, Silver May Succumb To Profit-Taking Amid Light US Docket
• Copper At A Crossroads Near 3.08 Against A Bearish Tech. Backdrop

Crude oil has been sent reeling in Asian trading today (WTI: -1.31 percent, Brent: -0.75 percent) following a slump in Chinese Industrial Production figures released over the weekend. The gauge of output in the second-largest consumer of the commodity deteriorated to its lowest since 2008, rekindling concerns over a deceleration for broader economic growth.

The dismal data from the Tiger economy has overshadowed Russian crude supply disruption fears. The US announced a further round of sanctions targeting Russian energy producers on Friday. The latest round of restrictions has banned the involvement of Western firms in oil exploration activities in Russia, the world’s second-largest oil exporter.

This may threaten to dampen production in the longer-term, which in turn would be supportive for crude prices. Yet near-term disruptions appear unlikely at this point given Western Europe remains reluctant to turn off the taps from its largest energy supplier.

Meanwhile, the precious metals are weaker across the board during the Asian session. Broad-based US Dollar strength is once again a likely catalyst behind the declines. This may reflect some anticipation of a more hawkish lean from the FOMC at their upcoming September meeting. Yet given the extent of recent declines for gold and silver, a period of profit-taking amongst shorts may be due. Coupled with a light US economic docket, this may limit the scope for further weakness, which in turn could generate a consolidation.

UPCOMING ECONOMIC DATA

Source:DailyFX Economic Calendar, Times In GMT

CRUDE OIL TECHNICAL ANALYSIS

WTI remains contained below its descending trendline and the 20 day SMA. The most recent pullback has negated a Bullish Engulfing pattern, leaving the commodity lacking potential reversal signals. This leaves a break below the 91.20 floor preferred for adopting new short positions. A climb above the descending trendline would be required to warn of a small base and the potential for a shift in sentiment.

Crude Oil: Breakout Imminent As Price Compression Continues

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Gold may maintain its downward trajectory amid an absence of reversal signals and a sustained downtrend on the daily. Clearance of the 1,233 hurdle sets the commodity up for a descent on the 1,222 barrier.

The DailyFX SpeculativeSentimentIndex suggests a mixed bias for gold based on trader positioning.

Gold: Remains At Risk Amid Sustained Downtrend

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

Silver is struggling to clear the critical 18.50 hurdle, which may prompt some profit-taking amongst shorts. This may prompt a period of consolidation for the precious metals. Yet hopes for a sustained recovery remain slim given a lack of key reversal patterns. A daily close below 18.50 would open a knock on the 2013 low of 18.19.

Silver: Bearish Backdrop Suggests Recovery May Prove Difficult

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

Copper remains at a crossroads near 3.08 following a dramatic decline from its descending trendline on the daily. A Hammer formation failed to find confirmation, casting doubts on a recovery for the base metal. Further, the scope for gains may be limited in light of the broader bearish backdrop for the commodity. A daily close below the nearby floor would open a run on the 3.01 mark.

Copper: Teasing Traders Near 3.08 Floor

Daily Chart - Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

Palladium is within striking distance of the Head and Shoulder’s pattern target of 817. While a Hammer hints at a corrective bounce, the reversal formation awaits confirmation from a successive up-day, which in turn leaves shorts preferred.

Palladium: Within Inches Of H&S Target

Daily Chart - Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

The appearance of a Dragonfly Doji near the 1,360 handle indicates indecision amongst traders. However, against the backdrop of a core downtrend on the daily, a consolidation rather than recovery appears a more likely path for platinum at this point. An eventual break of the nearby floor would cast the immediate risk lower for a run towards 1,314.

Platinum: Awaiting Break As Signs Of Indecision Emerge

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

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