Commodity prices are on the upswing as markets correct following Friday’s selloff in the wake of a disappointing US jobs report. Overnight data showing Chinese inflation slowed to a 29-month low at 2.2% is reinforcing support, hinting the world’s number-two economy and major raw materials consumer may have scope to ease monetary policy further after cutting rates last week.
Looking ahead, all eyes are on the euro-zone finance ministers’ summit set to get underway in Brussels today. The sit-down is expected to produce ratification of the operational details of Spain’s bank bailout effort and may produce a near-term bounce in assets geared to sentiment. Profit-taking on anti-risk positions with a view to the possibility that FOMC meeting minutes due to print on Wednesday may stoke QE3 expectations stands to reinforce this dynamic.
On balance, this opens the door for a larger recovery in growth-sensitive crude oil and copper prices. Meanwhile, gold and silver may find scope to rise as haven flows reverse out of the US Dollar while returning stimulus hopes boost inflation-hedge demand.
Comex E-Mini Copper (NY Close): $3.410 // -0.084 // -2.40%
Prices took out support at 3.424 to expose the 23.6% Fibonacci expansion at 3.378. A break below this barrier exposes the 3.250-96 area marked by a major multi-month bottom and the 38.2% Fib. The 3.424 has been recast as minor resistance, with a break above that seeing trend line resistance at 3.490.
WTI Crude Oil (NY Close): $84.45 // -2.77 // -3.18%
Prices broke lower through resistance-turned-support at 85.50 after putting in a Shooting Star candlestick below the 90.00 figure. Sellers now aim to challenge the 82.10-81.19 area marked by the 23.6% Fibonacci expansion and a former range bottom, with a break below that exposing the 38.2% level at 77.83. The 85.50 level has been recast as resistance once again.
Prices broke lower as expected after showing a bearish Evening Star candlestick pattern below falling trend line resistance set from late March. A breach of the 1,600/oz figure, a psychological barrier reinforced by the 23.6% Fibonacci expansion, now sees bears challenging the 38.2% level at 1,575.81. A break below that targets the 50% Fib at 1,555.61. The 1,600 level has been recast as near-term resistance.
Spot Silver (NY Close): $27.11 // -0.56 // -2.02%
Prices are testing support is at 26.75, with a break below that exposing the multi-month triple bottom at 26.05. Near-term resistance is now 28.23-52 area at the intersecting of a falling trend line and former support at the bottom of a Flag chart formation.
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