Crude Oil, Gold Look to Eurogroup Meeting for Direction Cues

Ilya Spivak

Crude oil and gold prices are looking to a meeting of Eurozone finance ministers for direction cues as Italian political instability continues to loom large.

Talking Points

  • Crude Oil, Copper Look to Euro FinMin Summit to Guide Risk Appetite
  • Gold and Silver May Rise if EU Officials Dither in Italy Commentary

Commodity prices are little-changed in European trade as S&P 500 futures recover from steep losses recorded in early overnight trade, hinting sentiment is finding its footing after a China-driven burst of risk aversion to start the week. Cycle-sensitive crude oil and copper prices have recovered to trade effectively flat having been down as much as 0.7 and 0.9 percent just a few hours earlier.

Looking ahead, all eyes are on the Eurozone Finance Ministers meeting set to begin in Brussels. The sit-down is expected to be followed by press conferences from recently installed Eurogroup head Jeroen Dijsselbloem, EU Economic Affairs Commissioner Olli Rehn and ESM chief Klaus Regling. Needless to say, traders will be acutely focused on any remarks regarding Italian political instability in the wake of the inconclusive general election outcome.

On balance, supportive remarks may add fuel to recovering risk appetite, pushing shares higher along with crude oil and copper. Endorsing a specific outcome publicly may be counter-productive however considering much of the current deadlock in Italy follows from widespread protest voting against austerity imposed by the EU-sponsored government of Mario Monti. With that in mind, the so-called “Eurogroup” may hold off on specifics, allowing the slide toward new elections already making the rounds across the newswires to continue. That may limit the near-term upside in the risk space.

Meanwhile, gold and silver are treading water and waiting for the next catalyst to spark directional momentum. A nearly empty US economic calendar offers little to inform the Fed stimulus outlook. That puts the Eurozone summit in focus again, playing to precious metals’ allure at times when a credible threat to the soundness of financial markets emerges. With that in mind, a lack of decisive language on Italy may reboot sovereign stability fears and push gold and silver higher.

WTI Crude Oil (NY Close): $90.68 // -1.37 // -1.49%

Prices broke support at 91.13, the 50% Fibonacci retracement, exposing the 61.8% level at 89.45. A further push beneath that aims for the 76.4% Fib at 87.38. The 91.13 level has been recast as near-term resistance, with a reversal back above that targeting the 38.2 % Fib at 92.80.

Commodities_Oil_Gold_Look_to_Eurogroup_Meeting_for_Direction_Cues_body_Picture_3.png, Crude Oil, Gold Look to Eurogroup Meeting for Direction Cues
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Commodities_Oil_Gold_Look_to_Eurogroup_Meeting_for_Direction_Cues_body_Picture_3.png, Crude Oil, Gold Look to Eurogroup Meeting for Direction Cues

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1576.23 // -3.35 // -0.21%

Prices are testing support at 1570.37, the 38.2% Fibonacci expansion. Near-term resistance is at 1589.36, the 23.6% level, with a break above that aiming for the February 26 high at 1620.09. Alternatively, a break downward initially aims for the 61.8% Fib at 1554.62.

Commodities_Oil_Gold_Look_to_Eurogroup_Meeting_for_Direction_Cues_body_Picture_4.png, Crude Oil, Gold Look to Eurogroup Meeting for Direction Cues
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Commodities_Oil_Gold_Look_to_Eurogroup_Meeting_for_Direction_Cues_body_Picture_4.png, Crude Oil, Gold Look to Eurogroup Meeting for Direction Cues

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.60 // +0.06 // +0.21%

Prices are testing below support at 28.46, the 23.6% Fibonacci expansion, having put in a bearish Dark Cloud Cover candlestick pattern below resistance marked by the June 6 close at 29.42. A confirmed break downward exposes the 38.2% level at 27.86.

Commodities_Oil_Gold_Look_to_Eurogroup_Meeting_for_Direction_Cues_body_Picture_5.png, Crude Oil, Gold Look to Eurogroup Meeting for Direction Cues
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Commodities_Oil_Gold_Look_to_Eurogroup_Meeting_for_Direction_Cues_body_Picture_5.png, Crude Oil, Gold Look to Eurogroup Meeting for Direction Cues

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.502 // -0.046 // -1.30%

Prices are testing support marked by a rising trend line set from early June (3.515) and the 38.2% Fibonacci expansion (3.495). A reversal from here sees resistance is at 3.536, the 23.6% expansion, followed by the February 28 high at 3.601. Alternatively, a push downward initially eyes the 50% level at 3.463.

Commodities_Oil_Gold_Look_to_Eurogroup_Meeting_for_Direction_Cues_body_Picture_6.png, Crude Oil, Gold Look to Eurogroup Meeting for Direction Cues
View photos
Commodities_Oil_Gold_Look_to_Eurogroup_Meeting_for_Direction_Cues_body_Picture_6.png, Crude Oil, Gold Look to Eurogroup Meeting for Direction Cues

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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