Crude Oil, Gold May Rise as Risk Appetite Ends Week on the Upswing

DailyFX

Crude oil and gold prices may end the week on the upswing as S&P 500 index futures point to firming risk appetite before the opening bell on Wall Street.

Talking Points

  • Commodities Treading Water Ahead of US Consumer Confidence Data
  • S&P 500 Index Futures Point to Risk-On Mood Prevailing into Week-End

Commodities are treading water ahead of the opening bell on Wall Street as traders wait for the release of the University of Michigan’s gauge of US Consumer Confidence. Sentiment is expected to nudge lower in October after hitting a four-month high in the previous month. Markets continue to hope a firmer US recovery will help offset headwinds from a recession in Europe and a slowdown in Asia. This means soft data from the world’s top economy is likely to carry negative implications for risk appetite.

Such an outcome may weigh on cycle-sensitive crude oil and copper prices while gold and silver come under pressure as safe-haven flows buoy the US Dollar. With that said, US economic data has generally tended to surpass expectations by an increasing margin over recent weeks (according to data from Citigroup), meaning the probability of a sentiment-supportive upside surprise appears credible. Indeed, S&P 500 stock index futures are pointing higher ahead of the opening bell on Wall Street, pointing to a risk-on mood that may push commodities higher into the end of the trading week.

WTI Crude Oil (NY Close): $92.07 // +0.82 // +0.90%

Prices are testing resistance at the would-be neckline of an inverse Head and Shoulders bottom (92.58), with a break higher implying a measured upside target at 98.10. Support stands at 87.66, the 38.2% Fibonacci retracement. A drop below that targets the 50% level at 83.76.

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Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1767.35 // +5.00 // +0.28%

Prices pushed lower to support at the bottom of a bearish Rising Wedge chart pattern (1761.49) after putting in a Dark Cloud Cover candlestick pattern at resistance in the 1790.55-1802.80 area. Negative RSI divergence argues in favor of a downside scenario. Support is reinforced by the 23.6% Fibonacci retracement at 1747.20, with a break below that targeting the 38.2% level at 1717.13. Alternatively, a break above 1802.80 initially targets 1818.95.

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Crude_Oil_Gold_May_Rise_as_Risk_Appetite_Ends_Week_on_the_Upswing_body_Picture_4.png, Crude Oil, Gold May Rise as Risk Appetite Ends Week on the Upswing

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $33.99 // +0.01 // +0.03%

Prices followed the completion of a Bearish Engulfing candlestick pattern with a drop to range support at 33.66, a barrier reinforced by the 23.6% Fibonacci retracement at 33.18. A break below the latter boundary exposes the 38.2% Fib at 31.83. Negative RSI divergence reinforces the case for a downside scenario. Near-term resistance stands at the 35.00 figure, with a break above that initially targeting the October 28 2011 high at 35.66.

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Crude_Oil_Gold_May_Rise_as_Risk_Appetite_Ends_Week_on_the_Upswing_body_Picture_5.png, Crude Oil, Gold May Rise as Risk Appetite Ends Week on the Upswing

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.752 // +0.034 // +0.91%

Prices continue to consolidate below resistance at a falling trend line set from early February (3.820). 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. A push below that targets the 38.2% level at 3.627.

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Crude_Oil_Gold_May_Rise_as_Risk_Appetite_Ends_Week_on_the_Upswing_body_Picture_6.png, Crude Oil, Gold May Rise as Risk Appetite Ends Week on the Upswing

Daily Chart - Created Using FXCM Marketscope 2.0

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

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