Gold And Silver Recover Ground As US Dollar Loses Steam Ahead Of FOMC

Talking Points

• Pressure On The Precious Metals Eases As Caution Persists Ahead of FOMC
• WTI Sustained Recovery Questionable Amid Void Of Bullish Fundamental Cues
• Copper Remains At A Crossroads Near 3.08 Against A Bearish Technical Backdrop

Gold and silver have managed to regain their footing in recent trade as the US Dollar loses momentum ahead of the FOMC decision later in the week. Expectations for a more hawkish lean from the Federal Reserve had bolstered the greenback over recent months, which in turn has weighed on the precious metals. Yet the risk that the central bank will not deliver may afford the alternative assets some breathing room ahead of the event itself.

Meanwhile, the spread between the WTI and Brentcrude benchmarks has narrowed to a five month low after WTI shrugged off a disappointing US Industrial Production figure on Monday. However, an absence of bullish fundamental cues for the growth-sensitive commodity could limit the scope for a sustained recovery. Nonetheless, traders should not preclude the potential for a shorter-term corrective bounce, given the magnitude and extent of its declines over the past several months.

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 bounce from the 91.20 floor has yielded a Hammer formation. Yet against a broader bearish backdrop the reversal pattern may struggle to find follow-through. 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 has managed to regain its footing near the 1,222 mark yet remains confined within a broader downtrend on the daily. With an absence of key reversal signals, a sustained recovery may prove difficult. A climb over the 1,233 hurdle is likely to see selling pressure renewed at the 1,241 ceiling.

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 break the critical 18.50 barrier, which may prompt some profit-taking amongst shorts and a period of consolidation for the precious metals. While a Hammer formation hints at corrective bounce, the reversal signal has seen a lackluster response. Alongside signs of a downtrend on the daily a sustained recovery may prove difficult. 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. A Hammer which hinted at a corrective bounce failed to find follow-through, suggesting the bears remain in control of prices. Further, selling pressure seems heavy at the 836 mark, leaving the immediate risks skewed to the downside.

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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