Crude Oil Plunges Below $102, Focus Turns To Upcoming US Data
Talking Points
WTI Tumbles As Geopolitical Tensions Ease
Gold Stabilizes on Weaker US Dollar
Focus Turns To Upcoming US Economic Data
Crude oil has suffered its most dramatic decline since January 2nd as concerns over Eastern Europe abate and US crude inventory levels rise further. Meanwhile, gold and silver have stabilised as a weaker greenback has likely benefited the precious metals.
WTI Tumbles as Geopolitical Tensions Ease
Easing Ukrainian turmoil has quashed fears over potential supply disruptions for energy commodities and has likely caused traders to unwind long positions in crude oil. Separately, an inventories report from the Department of Energy released during US trading contributed to a plunge in the price of the WTI contract below the $102.00 handle. The US government agency reported that crude inventories rose for the seventh week in a row with newswires attributing the build to lower demand from refineries.
Gold Stabilises on Weaker US Dollar
The continued declines for crude have not extended to gold and silver, which had also rallied on fear-flows surrounding the Ukraine. The precious metals have likely benefited from weakness in the greenback which fell overnight on the back of disappointing US non-manufacturing data.
Investor Optimism Vulnerable To NFP Miss
As Eastern Europe moves off traders’ radars, upcoming US economic data may give the commodities space further directional guidance. Recent disappointing economic readings from the world’s largest economy have failed to dent investor optimism, as newswires point to temporary weather-related factors as a possible cause.
However, sustained weak data prints, may raise concerns over the strength of the US economic recovery. Upcoming initial joblessclaims may prove noteworthy as an interim gauge of labour market conditions ahead of the critical Non-Farm Payrolls figure due at the end of the week. Another disappointing reading may cause investor sentiment to sour, which in turn may weigh on growth-sensitive commodities like crude oil and copper.
CRUDE OIL TECHNICAL ANALYSIS – Crude’s recent turnaround has negated several previously bullish technical signals for the commodity. Prices have broken below the 20 SMA and trendline support suggesting a shift to a downtrend. Additionally, A Dark Cloud Cover candlestick pattern on the daily has received confirmation via successive down day. Combined with a break below buying support at the psychologically-significant $102.00 level (also the 23.6% Fib Retracement mark), we are left with a bearish technical bias for WTI.
Daily Chart - Created Using FXCM Marketscope 2.0
NATURAL GAS TECHNICAL ANALYSIS – Buyers remain prepared to support the natural gas price at the 4.450 mark as the commodity stabilizes following last week’s dramatic declines. With the 20 SMA signaling a downtrend, a corrective bounce at this stage would be seen as an opportunity to enter new short positions. Resistance is likely looming at former support near 4.917 (the 61.8% Fib Retracement level).
Daily Chart - Created Using FXCM Marketscope 2.0
GOLD TECHNICAL ANALYSIS – Gold has retraced some of its recent gains towards the 1,320 support mark. This has resulted in the emergence of a Dark Cloud Cover candlestick pattern on the daily which may be hinting at further declines for the commodity. However with the uptrend intact, a bullish bias remains preferred for the precious metal with a potential target offered by the October 2013 highs near $1,360.
Daily Chart - Created Using FXCM Marketscope 2.0
SILVER TECHNICAL ANALYSIS – The bulls have been unable to reclaim the 21.50 mark for silver, which continues to act as important resistance for the commodity. The rate of change indicator has slipped into negative territory, suggesting that downside momentum is building and a trend shift looks likely to emerge for the precious metal.
Daily Chart - Created Using FXCM Marketscope 2.0
COPPER TECHNICAL ANALYSIS– As noted in yesterday’s commodities report, the recent bounce in copper provided an opportunity to enter new short positions. A potential target is offered by the $3.175 mark which remains an important support level.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by David de Ferranti, Market Analyst, FXCM Australia
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