Commodity
prices sank as renewed Eurozone debt crisis fears sparked market-wide
risk aversion. The focus now turns to the day’s Fed speaking calendar.
Talking Points
- Crude Oil, Copper Drop as EU-Linked Risk Aversion Grips Financial Markets
- Gold and Silver Look to Federal Reserve Speaking Calendar for QE Outlook
Commodity prices are sinking in European trade amid broad-based risk aversion following comments from Standard & Poor’s analyst Moritz Kraemer warned that Greece may have to undergo another debt restructuring. A disappointing set of Eurozone confidence indicators
compounded the dour mood across exchanges, renewing worries about the
impact of a now widely expected recession in the region on global growth
at large.
Perhaps
most ominously, Mr Kraemer noted that official creditors (presumably
including the ECB, which owns substantial Greek bond holdings and sat
out the most recent PSI outing) will need to take part. He added that
assigning “preferred status” to some creditors whereby they don’t
participate in a restructuring “significantly increases” the risk for
private bond holders and buoys borrowing costs, which “makes it harder for Greece and other countries on the [Eurozone] periphery to establish a sustainable debt trajectory going forward.”
Sentiment-linked crude oil and copper prices moved lower along with stock prices, while gold and silver
declined as safe-haven flows poured into the US Dollar and sapped
demand for precious metals as an alternative to paper currency. Looking
ahead, the spotlight falls on the Federal Reserve speaking calendar, where remarks from Atlanta and Philadelphia Fed Presidents Lockhart and Plosser as
well as Chairman Bernanke are on tap. Any perceived increase in the
likelihood of QE3 pulled from the comments is likely to broadly boost
commodity prices, and vice versa.
On the economic data front, things are relatively quiet. A slight pickup to 350k on weekly initial jobless claims will mean relatively little for the four-week average and so will probably see a muted response from price action. Elsewhere, the Kansas City Fed manufacturing activity gauge is forecast to remain unchanged in March from the eight-month high recorded in February. Finally, the third revision of fourth-quarter US GDP figures is likely to be a non-event absent wild deviations from previously released numbers.
WTI Crude Oil (NY Close): $105.41 // -1.92 // -1.79%
Prices
appear to be carving out a descending Triangle chart pattern. The setup
generally argues in favor of a turn lower but confirmation is needed on
a clear break of support at 104.75, the 38.2% Fibonacci retracement
level. Near-term falling trend line resistance lines up at 107.87.
Daily Chart - Created Using FXCM Marketscope 2.0
Spot Gold (NY Close): $1663.68 // -17.10 // -1.02%
Prices
reversed back the 23.6% Fibonacci retracement at 1666.29 after finding
resistance at the 38.2% level (1690.04). Sellers now target the 38.2%
Fib expansion level at 1634.81, with a break below that exposing the 50%
boundary at 1615.48. The 1666.29 level has been recast as near-term
resistance.
Daily Chart - Created Using FXCM Marketscope 2.0
Spot Silver (NY Close): $32.06 // -0.53 // -1.63%
Prices continue to consolidate below resistance at 32.93, the former neckline of a Head and Shoulders (H&S) top carved out between
late January and mid-March, and horizontal support at 31.04. A break
blower exposes the first downside barrier at 29.79. The H&S setup
broadly implies a measured downside target at 26.84.
Daily Chart - Created Using FXCM Marketscope 2.0
COMEX E-Mini Copper (NY Close): $3.792 // -0.088 // -2.27%
Prices
are testing the bottom of a Triangle chart pattern carved out above
support at 3.696, the 38.2% Fibonacci retracement level. While the setup
is typically indicative of trend continuation, which in this case would
be a bullish development, confirmation is needed on a break of either
of its boundaries before firm conclusions can be drawn. Near-term
support is now at 3.761, while resistance stands at 3.896.
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