RS: Copper, Crude Oil Look to Fiscal Talks for Direction
The spotlight remains on Washington, DC as financial markets return from the Christmas holiday, where US policymakers have a mere five days left to deliver a deal avoiding the so-called “fiscal cliff”. The markets’ baseline scenario appears to call for a last-minute compromise that avoids an immediate fiscal shock but falls short of setting US public finances on a sustainable long-term path. The emergence of a loose framework for negotiating a “grand bargain” in the future also seems to be baked in.
While a watered-down accord is undeniably better for market-wide risk appetite than none at all, follow-through is likely to be limited to a short-term advance reflecting the dissipation of uncertainty. Indeed, with investors’ forecasts validated, the impetus for speculation evaporates. For commodities, this portends an uptick in cycle-sensitive crude oil and copper prices. Gold and silver may likewise find near-term support amid ebbing haven demand for the US dollar.
Prices are testing above resistance at 3.596, the 23.6% Fibonacci expansion. A break higher exposes the 38.2% level at 3.643. Near-term support is at 3.522, the December 20 low, with a decline below that aiming for a rising trend line at 3.450.
Prices are testing resistance at 91.23, the intersection of the 61.8% Fibonacci expansion and the top of a rising channel set from early November. A break higher targets the 76.4% level at 92.01. Support is at 90.59, the 50% Fib, with a drop below that exposing the 38.2% expansion at 89.98.
