Commodity prices are correcting broadly lower overnight as markets correct after Friday’s sharp surge in risk-linked assets and tumble in the US dollar, a move driven by an unexpected outcome to the EU leaders’ summit. S&P 500 stock index futures are accelerating lower in late Asian trade, hinting more of the same is ahead as kneejerk optimism gives way to a more sober outlook on what the sit-down practically achieved.
On balance, the summit did little to alter the near-term status quo. Spain will still get its bank bailout funneled through the sovereign channel, increasing the government’s liabilities. The empowerment of the EFSF/ESM rescue funds to recapitalize financial institutions directly will not be available until year-end, and only if banking union negotiations proceed as planned. That leaves the euro zone with no more of a firewall against the crisis than before, at best for the next six months.
Economic data stands to reinforce the risk-off mood as a roundup of dismal European manufacturing PMI readings reminds investors the region presents the most significant headwind to global economic growth this year. Final revisions of euro-zone figures are expected to confirm region-wide factory sector growth shrank at the fastest pace in three years. Manufacturing activity is also expected to fall again in Switzerland and the UK, although the rate of contraction is forecast to accelerate in the former while declining n the latter. The analogous US ISM metric is expected to reveal a bit of a slowdown as well, although the gauge is expected to hold above the 50 boom-bust level.
COMEX E-Mini Copper (NY Close): $3.496 // +0.164 // +4.92%
Prices are retesting falling trend line support-turned-resistance set from late January, with a break higher exposing 3.618. Initial support lines up at 3.424, with a break below that exposing 3.250.
WTI Crude Oil (NY Close): $84.96 // +7.27 // +9.36%
Prices are testing resistance at 85.11, the 23.6% Fibonacci retracement, with a break higher exposing the 38.2% level at 89.97 (a barrier reinforced by the psychologically significant 90.00 figure). Near-term support lines up at 81.19, with a break below that exposing the June 21 close at 78.11.
Prices launched higher from support at 1,551.50, the 61.8% Fibonacci expansion, to once again challenge the 1,600/oz. figure. A break above the 23.6% Fib at 1,606.74 exposes falling trend line resistance at 1,622.41. The 38.2% expansion at 1,585.44 now marks near-term support.
Spot Silver (NY Close): $27.48 // +1.11 // +4.19%
Prices bounced from Triple Bottom support at 26.06 to retest the formerly broken bottom of a Flag chart formation, now at 28.07. Near-term support is at 26.75, with a break below that exposing 26.05 anew.
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