RS: Copper, Oil Aim Higher on Risk Appetite Revival
Commodities remain highly sensitive to risk appetite trends, hinting prices may advance in North American trade as S&P 500 stock index futures point higher ahead of the opening bell on Wall Street. Sentiment is on the upswing after Germany’s Constitutional Court upheld parliament’s approval of the ESM bailout fund while UK industrial production figures surprised to the upside. The move has scope to carry forward as traders position for Wednesday’s release of minutes from June’s Federal Reserve monetary policy meeting.
In the aftermath of Friday’s disappointing US jobs report, investors are likely pining for stimulus once again. For their part, Ben Bernanke and company are unlikely to wholly dismiss the possibility of QE3 for fear of spooking financial markets, meaning the door for more aggressive accommodation is likely to be kept open for now (at least rhetorically). That may encourage traders holding risk-off bets to book profits ahead of the release on the risk that the outcome is perceived as dovish and sends risky assets higher.
On balance, this paves the way for crude oil and copper to follow shares higher while gold and silver capitalize on ebbing having demand for the US dollar. Inflation-hedge flows may likewise enter into the picture to support precious metals on the possibility that an uptick in QE3 bets breeds fears of paper currency dilution The API set of weekly crude oil inventory figures headlines the economic calendar.
Prices are testing support at 3.384, the 23.6% Fibonacci retracement, with a break lower exposing the major bottom at 3.250. Near-term resistance lines up at 3.474, the 38.2% level, with a break above that exposing the 50% Fib at 3.548.
Prices are testing 23.6% Fibonacci retracement support at 84.14 having edged lower after putting in a Shooting Star candlestick below resistance at 88.40, the 38.2% level. A break through support exposes 81.19. Alternatively, a rebound that produces a daily close above near-term resistance opens the door for a challenge of the 90.00 figure.
