Crude Oil, Gold Look to Cyprus Bank Levy Vote for Guidance

DailyFX

Crude oil is may follow stocks lower while gold rises if Cyprus votes to approve an EU bailout plan containing a controversial bank deposit levy.

Talking Points

  • Crude Oil, Copper Vulnerable if Cyprus Parliament Approves Bank Levy
  • Gold and Silver May Find Support as Markets Fret About Credit Instability

Commodity prices are treading water overnight as all eyes remain on Cyprus, where Parliament is due to vote on the terms of the controversial EU bailout deal that will impose a bank levy on deposits in Cypriot banks. Passage of the measure will set a precedent for debt crisis management that could spark bank runs in other Eurozone countries with sickly banks (notably Spain) as depositors look to safeguard their savings from potential future seizure.

Fears of such an outcome may weigh on risk appetite, punishing cycle-sensitive crude oil and copper prices. Meanwhile, gold and silver may advance as credit instability concerns fuel demand for assets whose value is not necessarily reliant on well-functioning financial markets.

Bloomberg News reports the Cyprus vote is scheduled at 16:00 GMT. That is likely to undermine the markets’ reaction to US Housing Starts and Building Permits date, due at 12:30 GMT. Expectations call for narrow improvements on both fronts but a significant directional response seems unlikely while uncertainty over the Cyprus situation continues to hang over global exchanges.

WTI Crude Oil (NY Close): $93.74 // +0.29 // +0.31%

Prices narrowly took out resistance at 93.69, the 50% Fibonacci retracement, exposing the 61.8% barrier at 94.73 as the next upside objective. The 93.69 mark has been recast as near-term support. A reversal back beneath that aims for the 38.2% Fib at 92.66.

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Commodities_Oil_Gold_Look_to_Cyprus_Bank_Levy_Vote_for_Guidance_body_Picture_3.png, Crude Oil, Gold Look to Cyprus Bank Levy Vote for Guidance

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1605.63 // +13.68 // +0.86%

Prices narrowly edged above resistance at 1604.87, the 38.2% Fibonacci retracement, exposing the 50% level at 1620.28. A further push above that aims for the 61.8% Fib at 1635.68. The 1604.87 mark has been recast support, with a turn back beneath that eyeing the 23.6% retracement at 1585.81.

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Commodities_Oil_Gold_Look_to_Cyprus_Bank_Levy_Vote_for_Guidance_body_Picture_4.png, Crude Oil, Gold Look to Cyprus Bank Levy Vote for Guidance

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.86 // +0.11 // +0.38%

Prices continue to consolidate above support at 28.46, the 23.6% Fibonacci expansion. Near-term resistance is in the 29.42-92 area, with a break higher exposing a falling trend line now at 30.43. Alternatively, a reversal below support targets the 38.2% level at 27.86.

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Commodities_Oil_Gold_Look_to_Cyprus_Bank_Levy_Vote_for_Guidance_body_Picture_5.png, Crude Oil, Gold Look to Cyprus Bank Levy Vote for Guidance

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.428 // -0.092 // -2.61%

Prices are testing support at 3.415, the 50% Fibonacci expansion. A break below that exposes the 61.8% level at 3.378. Near-term resistance is at 3.453, the 38.2% Fib, with a rebound back above that eyeing the 23.6% expansion at 3.499.

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Commodities_Oil_Gold_Look_to_Cyprus_Bank_Levy_Vote_for_Guidance_body_Picture_6.png, Crude Oil, Gold Look to Cyprus Bank Levy Vote for Guidance

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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