Crude Oil Aims Higher on Risk Appetite, Gold Awaiting Trigger

DailyFX

Crude oil prices are aiming higher amid a broad-based swell in risk appetite while gold looks to Fed chatter and the QE outlook in hopes of finding direction cues.

Talking Points

  • Crude Oil, Copper Aim Higher Amid Broad Increase in Risk Appetite
  • Gold and Silver Look to US Dollar for Direction, Fed Chatter in Focus

Crude oil is shrugging off an overnight report from the IEA that saw the agency cut its 2013 demand outlook, pushing to a two-week high amid a swell in market-wide risk appetite. Similarly cycle-sensitive copper prices are following suit, with a pickup in S&P 500 stock index futures ahead of the opening bell on Wall Street hinting more of the same is on tap ahead.

In the absence of major fireworks on the economic calendar after January’s US Retail Sales report printed in line with expectations, momentum seems to be driven by a handful of broadly supportive headlines emerging overnight. US President Barack Obama clearly steered perceptions of US fiscal policy away from expectations of harsh austerity in his State of the Union address while the Bank of England reiterated that it intends to remain accommodative despite buoyant inflation.

Meanwhile, gold and silver are trading water and it is unclear whether a solid direction move is to be had without some guidance from the US Dollar. The greenback’s formerly iron-clad inverse correlation with share prices remains negligible on short-term studies, meaning a pickup in risk appetite does not necessarily imply one thing or another for anti-fiat assets. Scheduled comments from St. Louis Fed President James Bullard may tip the scales however if he offers any guidance on QE longevity.

WTI Crude Oil (NY Close): $97.51 // +0.48 // +0.49%

Prices are rebounding from support at 95.14, the 23.6% Fibonacci retracement. Near-term resistance is in the 98.02-21 area, marked by the 23.6% Fib expansion and the January 30 swing high. A break above that targets the 38.2% expansion at 99.91. Alternatively, a reversal below 95.14 initially eyes 93.24.

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Commodities_Oil_Aims_Higher_on_Risk_Appetite_Gold_Awaiting_Trigger_body_Picture_3.png, Crude Oil Aims Higher on Risk Appetite, Gold Awaiting Trigger

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1651.15 // +3.20 // +0.19%

Prices broke critical rising trend line support set from mid-May 2012. Sellers are now testing the 38.2% Fibonacci expansion (1648.20), with a confirmed break exposing the 50% mark at 1633.06. The trend line – now at 1660.27 – has been recast as near-term resistance.

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Commodities_Oil_Aims_Higher_on_Risk_Appetite_Gold_Awaiting_Trigger_body_Picture_4.png, Crude Oil Aims Higher on Risk Appetite, Gold Awaiting Trigger

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $31.11 // +0.17 // +0.53%

Prices broke through support at 31.24, marked by the 23.6% Fibonacci expansion. Sellers now target the 38.2% expansion (30.48), with a push below that aiming for the 50% Fib (29.87). The 31.24 level has been recast as near-term resistance, with a reversal above that aiming for the underside for a formerly broken rising channel at 31.39.

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Commodities_Oil_Aims_Higher_on_Risk_Appetite_Gold_Awaiting_Trigger_body_Picture_5.png, Crude Oil Aims Higher on Risk Appetite, Gold Awaiting Trigger

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.744 // +0.022 // +0.59%

Prices are turning lower as expected after putting in a Shooting Star candle below resistance at the top of a Rising Wedge chart pattern. Near-term support is at 3.718, the December 10 high, with a break below that aiming for the Wedge bottom at 3.694. The formation’s topside barrier is now at 3.785.

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Commodities_Oil_Aims_Higher_on_Risk_Appetite_Gold_Awaiting_Trigger_body_Picture_6.png, Crude Oil Aims Higher on Risk Appetite, Gold Awaiting Trigger

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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