Crude oil and gold prices await the ISM Non-Manufacturing Composite gauge to offer guidance on the probability of a near-term reduction in Fed QE efforts.
Talking Points
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Crude Oil, Copper to Follow Risk Trends as ISM Informs Fed Policy Bets
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Gold and Silver May Decline if QE3 Taper Clues Support the US Dollar
Commodity prices are treading water in European trade as investors look past a broadly in-line set of May Eurozone PMI revisions to turn their attention to the US calendar. The ISM Non-Manufacturing Composite gauge is in focus. Expectations suggest the pace of service-sector growth increased in May, snapping a two-month deceleration streak.
An outcome in line with expectations is likely to amplify speculation about a near-term reduction in Federal Reserve stimulus efforts, weighing on risk appetite and punishing cycle-sensitive crude oil and copper prices. Gold and silver may likewise come under fire amid waning anti-fiat demand as bets on a cutback in asset purchases offer support to the US Dollar.
An unexpectedly dismal print on the manufacturing component of the ISM data set released earlier in the week leaves the door open for a surprise however, which may yet offer support to risk trends and commodities alike. The Fed will also release its Beige Book regional economic conditions survey, which may temper or amplify the sentiment implications of the ISM release.
Crude Oil Technical Analysis (WTI) - Prices declined as expected after putting in a bearish Dark Cloud Cover candlestick pattern. A bounce from falling channel support targets the formation’s top at 94.68, with a break above that aiming for a falling trend line set from September 2012, now at 96.75. Channel support is at 90.81.
Daily Chart - Created Using FXCM Marketscope 2.0
Gold Technical Analysis (Spot) - Prices put in a Bearish Engulfing candlestick pattern, hinting a turn lower may be ahead. Near-term support is at 1386.51, the 23.6% Fibonacci retracement. A break below that targets the 38.2% level at 1364.62. Initial resistance is at 1421.90, the May 31 swing high.
Daily Chart - Created Using FXCM Marketscope 2.0
Silver Technical Analysis (Spot) - Prices continue to consolidate above support at 22.03, the 38.2% Fibonacci retracement. A break below that targets the 50% level at 21.17. Near-term resistance is at 23.10, the 23.6% Fib, with a turn back above that eyeing the April 26 high at 24.82.
Daily Chart - Created Using FXCM Marketscope 2.0
Copper Technical Analysis (COMEX E-Mini) - Prices appear to have completed a bullish Head and Shoulders (H&S) bottom chart formation, pointing to gains ahead. Initial resistance is at 3.399, the 38.2% Fibonacci expansion, with a break above that targeting the 50% level at 3.443. In broader terms, the H&S setup implies a measured upside objective at 3.715. Neckline resistance-turned-support is at 3.345, with a move beneath that eyeing the May 30 low at 3.256.