Commodities: Fed Meeting Minutes to Set Tone for US Jobs Report

DailyFX

Commodity prices look for minutes from December’s Federal Reserve meeting to set a precedent for interpreting Friday’s US employment report.

Talking Points

  • Commodities Correct Lower as Markets Digest “Fiscal Cliff” Deal Rally
  • December’s FOMC Minutes to Set Precedent for Reading US Data Flow

Commodities are edging lower in early European trade as markets digest yesterday’s runaway rally in the wake of a last-minute deal to avert the US “fiscal cliff”. Minutes from December’s FOMC meeting headline the economic calendar. The sit-down saw Ben Bernanke and company expanding asset purchases to $85 billion but also linking the path of interest rates to inflation expectations and the unemployment, establishing the clearest stimulus exit strategy yet. With that in mind, traders will be keen to scour the release for clues about the possibility of a sooner-than-expected withdrawal of accommodation.

It is unclear whether investors would treat such an outcome supportive for risk appetite (and thereby for commodities) in that it would imply a stronger US economy.An alternative reading may imply a risk-negative response to the removal of Fed support for the recovery. In fact, a divergence may materialize whereby precious metals fall on ebbing inflation bets while crude oil and copper rise on copper on improved growth hopes. Whatever the case may be, price action following the release will be interesting to monitor in that it will help set a precedent for interpreting Friday’s jobs report and forthcoming US data in general.

WTI Crude Oil (NY Close): $93.12 // +1.30 // +1.42%

Prices pushed aggressively higher, taking out resistance marked by a rising channel top set from early November challenge the 100% Fibonacci expansion at 93.25. A break above that aims for the 123.6% level at 94.51. Near-term support is in the 91.23-92.01 area, marked by the 61.8% and 76.4% Fibs respectively. A drop below this broadly exposes the 90.00 figure.

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Commodities_Fed_Meeting_Minutes_to_Set_Tone_for_US_Jobs_Report_body_Picture_4.png, Commodities: Fed Meeting Minutes to Set Tone for US Jobs Report

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1686.90 // +13.12 // +0.78%

Prices broke above resistance at 1680.80, the 38.2% Fibonacci retracement, exposing the 50% level at 1694.82. The 1680.80 level has been recast as near-term support, with a reversal back below that aiming for the 23.6% retracementat 1663.46.

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Commodities_Fed_Meeting_Minutes_to_Set_Tone_for_US_Jobs_Report_body_Picture_3.png, Commodities: Fed Meeting Minutes to Set Tone for US Jobs Report

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $31.03 // +0.70 // +2.29%

Prices pushed higher to challenge the 38.2% Fibonacci retracement at 31.42. A break above that targets the 50% level at 31.99. Near-term supports at 30.29 and 30.72, the 14.6% and 23.6% Fibs respectively.

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Commodities_Fed_Meeting_Minutes_to_Set_Tone_for_US_Jobs_Report_body_Picture_2.png, Commodities: Fed Meeting Minutes to Set Tone for US Jobs Report

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.736 // +0.084 // +2.30%

Prices took out resistance at a falling trend line set from mid-September and the 61.8% Fibonacci expansion (3.718). The bulls now aim to challenge the 76.4% level at 3.764, with a break above that eyeing the 100% mark at 3.839. The 3.718 level has been recast as near-term support, with the trend line (3.696) and the 50% Fib (3.680) in focus below that.

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Commodities_Fed_Meeting_Minutes_to_Set_Tone_for_US_Jobs_Report_body_Picture_1.png, Commodities: Fed Meeting Minutes to Set Tone for US Jobs Report

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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