Commodities Pare Losses on Eurozone PMIs, US Data Key Ahead

DailyFX

Talking Points

  • Commodities in Recovery Mode as Eurozone PMIs Countervail Risk Aversion
  • ADP Employment, ISM Service-Sector Gauge in Focus in US Trading Hours

Commodities are in recovery mode having entered the European session on the defensive amid broad-based risk aversion. The sour mood followed disappointing data from China and Australia overnight as well as comments from Spanish Prime Minister Mariano Rajoy stating a full bailout request is “not imminent”. Crude oil and copper followed stocks lower while gold and silver suffered as haven flows buoyed the US Dollar. Negativity has stated to ebb however after September’s Eurozone PMI results were revised higher and S&P 500 futures have erased earlier losses, hinting sentiment trends are shifting back to a neutral setting ahead of the opening bell on Wall Street.

Preliminary US employment figures from ADP as well as the ISM Non-Manufacturing Composite gauge are now in focus. The former number will help set the tone for Friday’s official Nonfarm Payrolls print, with ADP expected to report the economy added 140,000 jobs in September compared with 201,000 in the prior month. Meanwhile, the ISM reading is forecast to show service-sector activity grew at a slower pace over the same period. Traders continue to look to the US with hopes for a meaningful counterbalance to recession in the Eurozone and slowdown in Asia, so soft outcomes are likely to prove negative for risk appetite (and vice versa).

WTI Crude Oil (NY Close): $91.89 // -0.59 // -0.64%

Prices bounced from support at 89.44, the 38.2% Fibonacci expansion, to challenge the 23.6% level at 93.60. A break above this barrier exposes the underside of a rising channel set from early July, now at 96.46. Alternatively, a reversal through support targets the 50% Fib at 86.04.

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Commodities_Pare_Losses_on_Eurozone_PMIs_US_Data_Key_Ahead_body_Picture_3.png, Commodities Pare Losses on Eurozone PMIs, US Data Key Ahead

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1774.70 // -0.60 // -0.03%

Prices remain range-bound above a falling trend line connecting major swing highs since early November 2011 (1746.79). Near-term resistance is at 1790.55-1802.80 area, with a break above that exposing 1850.00 and the 1900.00 figure. Support is reinforced by the 23.6% Fibonacci retracement at 1737.59, with a push below that targeting the 38.2% and 50% Fibonacci retracements at 1704.25 and 1677.30 respectively.

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Commodities_Pare_Losses_on_Eurozone_PMIs_US_Data_Key_Ahead_body_Picture_4.png, Commodities Pare Losses on Eurozone PMIs, US Data Key Ahead

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $34.62 // -0.04 // -0.12%

Prices are testing above resistance at 34.80, the 76.4%Fibonacci retracement. A break higher exposes 36.89. Initial support lines up in the 32.93-33.14 area, marked by a horizontal pivot level and the 61.8% Fib, with a reversal below that targeting the 50% level at 31.79.

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Commodities_Pare_Losses_on_Eurozone_PMIs_US_Data_Key_Ahead_body_Picture_5.png, Commodities Pare Losses on Eurozone PMIs, US Data Key Ahead

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.802 // +0.016 // +0.42%

Prices continue to consolidate below resistance at a falling trend line set from early February (3.825). A break higher exposes swing highs at 3.955 and 3.988. Near-term support lines up at 3.707, the 23.6% Fibonacci retracement level. A push below that targets the 38.2% level at 3.627.

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Commodities_Pare_Losses_on_Eurozone_PMIs_US_Data_Key_Ahead_body_Picture_6.png, Commodities Pare Losses on Eurozone PMIs, US Data Key Ahead

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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