WTI Bounces From 80.00 Floor, Gold Remains Vulnerable Ahead Of US Data

Talking Points

• Crude Oil Bounces From Technical Barrier Amid Robust Demand Bets
• Silver Eyes 16.70 As Trendline Resistance Keeps Risks Skewed Lower
• Gold Vulnerable To USD Strength Over Q4 – Quarterly Forecast

Crude oil rebounded strongly on Thursday as rumors of supply cuts from OPEC producer Saudi Arabia surfaced. Newswires also pointed to a string of healthy manufacturing prints from the Eurozone, China and US as a signal of potential robust demand for the commodity. Looking to the session ahead, the prospect of further positive US data may tempt the crude bears into taking more chips off the table. However, over the near-term the scope for a more sustained advance is likely limited by lingering supply glut concerns.

Turning to the precious metals; gold slipped further in recent trade with another round of robust US economic releases lifting its US Dollar counterpart. Heading into the end of the week another strong set of housing figures from the world’s largest economy may offer the greenback further fuel, which could weigh on the yellow metal.

Over the week ahead the US Dollar faces a ton of event risk, headlined by the much-anticipated October FOMC decision. The central bank is widely expected to wind-up its long-running “QE” program, leaving traders to focus on the statement. A more hawkish tone on the back of continued improvements in the US labor market may support the USD, which would be negative for the precious metals.

Finally, copper prices climbed on Thursday with media sources citing positive Chinese manufacturing survey figures as a potential catalyst. Yet, the gains occurred long-after the initial release, suggesting bullish bets for broader global growth, and repositioning near the 3.00 technical barrier offer a more reasonable explanation.

On balance; the top-tier Chinese economic data this week presented a mixed bag. This in turn has left the commodity lacking clear guidance from the demand side of the equation. Going forward, a lack of strong conviction from traders could leave the base metal prone to further violent swings.

ECONOMIC EVENTS

Source:DailyFX Economic Calendar, Times In GMT

Market Movements (Thu 23 Oct, 2014, Close 5PM EST)

CRUDE OIL TECHNICAL ANALYSIS

Crude has bounced off the 80.00 floor, which has produced a Piercing Line pattern on the daily. Yet the scope for upside follow-through from the reversal signal may be limited by overhanging resistance at 84.00. Alongside a core downtrend (descending trendline, 20 SMA, ROC) a daily close below the 80.00 barrier would be required to open the 2012 low near 77.00.

Crude Oil: Awaiting Break Below Psychologically-Significant Barrier

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Gold’s slide below the 1,241 mark has helped confirm an Evening Star formation which may warn of a deeper setback. Yet at this stage indications of a short-term uptrend remain intact (20 SMA, ROC). This leaves a greater alignment of indicators desired before suggesting a bearish bias for the precious metal.

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

Gold: Retreat From 1,257 Generates Warning Signal

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

Silver remains in respect of trendline resistance and its retreat under the 17.30 floor has generated an Evening Star pattern. While typically a reversal signal from a preceding uptrend, the formation indicates the bears remain in control of the precious metal. This casts the immediate risk lower for a revisit of the 16.70 floor. Yet traders should be mindful that subdued negative momentum reflected by the ROC indicator suggests a clean descent may be difficult.

Silver: Respect of Trendline Resistance Casts Immediate Risks Lower

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

Copper’s wild intraday swings have continued following a bounce from the 3.00/01 floor. Trend indicators are warning of a potential shift in sentiment. Yet the violent impulsive moves leave a clearer directional bias lacking.

Copper: Impulsive Swings Leave Clearer Signals Desired

Daily Chart - Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

Palladium’s recovery continues following a climb over the 23.6% Fib. Short-term trend indicators have also shifted (ROC and 20 SMA), suggesting positive sentiment is returning. Sellers are likely to return on a retest of the 38.2% Fib. near 800.

Palladium: Recovery Continues As Trend Indicators Turn Upwards

Daily Chart - Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

Platinum continues to consolidate within the 1,242 to 1,289 range that has contained the precious metal over the past several weeks. With trend indicators swaying a breakout from the recent trading band would be desired to offer a clearer directional bias.

Platinum: Awaiting Breakout From Narrow Trading Band

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

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