Crude Oil Slips As Supply Fears Ease, China Data To Offer Copper Cues

Talking Points

• US Dollar slump to afford gold and silver breathing room
• Crude oil continues slide on ebbing supply disruption concerns
• Copper faces volatile week with abundance of China data on tap

Gold and silver may continue to keep traders in suspense as their pricing currency, the US Dollar, awaits guidance from the June FOMC Meeting Minutes. Meanwhile, crude oil remains vulnerable to ebbing concerns over supply disruptions in the Middle East. Finally, copper traders should brace themselves for volatility over the remainder of the week with a slew of top-tier Chinese economic data on tap.

Uninspired Dollar To Leave Gold Elevated

The direction of the US Dollar continues to offer gold and silver some guidance with a lackluster session for the greenback leaving the precious metals relatively unchanged on Monday. The release of the Minutes from Fed officials June sit-down are likely to offer the greenback some directional cues. If the communiqué carries the same reticent tone on the prospect of an eventual rate hike as seen in prior releases, the US Dollar bulls may be left lacking drive to push the currency higher. This in turn could leave gold and silver to remain elevated.

Lack of Conviction From Greenback Bulls Affords Gold Intraday Recovery

M15 Chart - Created Using FXCM Marketscope 2.0

Crude Slides With Middle East Supply Unaffected

Crude oil may continue its correction with WTI heading for its 7th straight day of declines as traders likely unwind positions built on concerns over potential supply disruptions in the Middle East. While newswires have reported fighting in Northern Iraq persists, the country’s crude oil production has been unaffected at this point. Additionally, Libyan supply is set to be restored to more normal levels following the return of key oil export terminals by rebels to the government last week. With production fears dissipating the risk premium that was built into crude benchmarks on the back of the conflict could continue to erode.

China Data To Catalyze Copper Volatility

An economic calendar drenched with Chinese data over the remainder of the week could yield signficant price swings for copper. The headline event for the commodities space will likely prove the June Trade Balance figures, which will offer a gauge of the Asian giant’s appetite for base metals. A recent turnaround in leading indicators (including PMI data) for the health of the Chinese economy have helped alleviate concerns over a further slowdown in economic growth. A strong set of trade balance figures above consensus estimates could play into this theme and in turn lead the growth-sensitive commodity higher.

Wednesday’s Chinese inflation data may see a less pronounced response from the base metals as they are unlikely to materially alter the outlook for PBOC policy at this point. This follows comments from policy officials this week suggesting strong stimulus will not be adopted and that the monetary policy will remain on a “prudent” course. CPI has subsisted below the PBOC’s target of 3.5 percent since January 2012.

Economic Calendar: Bounty of China Data On Tap

Source: Economic Calendar, DailyFX, Times In GMT

CRUDE OIL TECHNICAL ANALYSIS

WTI faces a make-or-break moment this week as the commodity drifts towards its ascending trendline on the daily. A break lower alongside signs of downtrend (made evident by the 20 SMA and ROC indicators) would pave the way for retreat to 101.30.

Crude Oil: Pivotal Moment Ahead

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Gold continues to consolidate between 1,310 and 1,330 with several Doji candlesticks suggesting indecision from traders. However, we are yet to see a meaningful reversal pattern emerge at this stage which casts doubt over the potential for a correction. Additionally signs of an uptrend (20 SMA and ROC) remain intact, thus pullbacks to support are seen as short-term buying opportunities.

The DailyFX SpeculativeSentiment Index suggests a bearish bias for gold based on trader positioning.

Gold: Pullbacks Offer Buying Opportunities

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

Silver continues to present short-term range-trading opportunities as the precious metal consolidates between 20.80 and 21.10. While upside momentum appears to be fading (ROC), the 20 SMA signals an uptrend is still in force. This means pullbacks to support are still seen as buying opportunities with targets offered by the other side of the range.

Silver: Consolidation Offers Short-Term Trading Opportunities

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

A Doji on the daily signals hesitation by the copper bulls following a failed attempt to breach the Feb 2014 high near 3.29. However, the candlestick signal may be insufficient to signal a change in the short-term trend, which remains to the upside. Buyers will likely look to step in and support prices ahead of the 3.23 mark.

Copper: Doji Highlights Hesitation Near 3.29

Daily Chart - Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

Palladium has cleared the critical 861 level which paves the way for further gains for the precious metal over the near-term. However, traders should be wary of a potential short-term pullback given the extreme reading for Consecutive Bars, which suggests gains may be slightly overextended. Current levels have not been witnessed since 2001, which leaves us to defer to psychologically-significant levels such as 900 for potential upside targets.

Palladium: Clears Key Resistance

Daily Chart - Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

Platinum’s pullback to its original breakout point at 1,489 is seen as a new opportunity to enter long positions for the precious metal. With indications of an uptrend intact (signaled by the 20 SMA) a run on the Sep 2013 high near 1,538 may be achievable. A daily close below support would negate a bullish bias and suggest a retreat to the former range-bottom at 1,424.

Platinum: Pullback Offers New Buying Opportunities

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

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