Crude Oil, Gold Prices May to Rise on Soft US Jobs Data

Crude oil and gold prices are likely to rise if a soft result on May’s US employment report reduces the probability of a near-term cutback of Fed stimulus efforts

Talking Points

• US Jobs Report in Focus as Markets Mull Fed QE3 Cutback Outlook

• Crude Oil, Gold Prices Likely to Rise on Soft Nonfarm Payrolls Print

All eyes are on May’s US Employment report. Consensus forecasts suggest nonfarm payrolls increased by 163,000 in May compared with 165,000 in the prior month. A print in line with expectations would fall below 3- and 6-month trend averages – both of which now hover above the closely watched 200k/month threshold. That would pour cold water on calls to scale down the Fed’s QE3 program, boosting cycle-sensitive crude oil and copper prices. It may likewise weigh on the US Dollar, offering a de-facto boost to gold and silver. Risk aversion struck Asian marketsovernight however, suggesting investors traders see a significant-enough risk of an upside surprise to pare pro-risk positions. Indeed, S&P 500 futures are oscillating in a choppy range ahead of the release, underscoring uncertainty across financial markets.

Crude Oil Technical Analysis (WTI)- Prices broke above near-term trend line resistance set from the May 20 swing high after completing a bullish Piercing Line candlestick pattern, exposing the 38.2% Fibonacci expansion at 95.71. A break above that targets the area marked by the 50% level and a falling trend line established from mid-September 2012. Near-term support is at 94.00, the 23.6% level, with a move beneath that eyeing the June 3 low at 91.23.

Commodities_Crude_Oil_Gold_Prices_May_to_Rise_on_Soft_US_Jobs_Data_body_Picture_3.png, Crude Oil, Gold Prices May to Rise on Soft US Jobs Data

Daily Chart - Created Using FXCM Marketscope 2.0

Gold Technical Analysis (Spot)- Prices put in a Bearish Engulfing candlestick pattern, hinting a turn lower may be ahead. Overall positioning looks to be taking the shape of a Flag chart formation, which likewise argues for bearish continuation. A break below the setup’s lower boundary (1398.67) initially exposes the 23.6% Fibonacci expansion at 1386.51. Alternatively, a move above the Engulfing high (1421.90) exposes the Flag top at 1437.83.

Commodities_Crude_Oil_Gold_Prices_May_to_Rise_on_Soft_US_Jobs_Data_body_Picture_4.png, Crude Oil, Gold Prices May to Rise on Soft US Jobs Data

8hr Chart - Created Using FXCM Marketscope 2.0

Silver Technical Analysis (Spot)- Prices continue to consolidate above support at 22.03, the 38.2% Fibonacci retracement. A break below that targets the 50% level at 21.17. Near-term resistance is at 23.10, the 23.6% Fib, with a turn back above that eyeing a falling trend line at 24.51.

Commodities_Crude_Oil_Gold_Prices_May_to_Rise_on_Soft_US_Jobs_Data_body_Picture_5.png, Crude Oil, Gold Prices May to Rise on Soft US Jobs Data

Daily Chart - Created Using FXCM Marketscope 2.0

Copper Technical Analysis (COMEX E-Mini)- Prices are consolidating below resistance at 3.399, the 38.2% Fibonacci expansion. A break above that targets the 50% level at 3.443. Near-term support is at 3.256.

Commodities_Crude_Oil_Gold_Prices_May_to_Rise_on_Soft_US_Jobs_Data_body_Picture_6.png, Crude Oil, Gold Prices May to Rise on Soft US Jobs Data

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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