Commodities: Crude Oil, Gold Rise as US Dollar Weakens Before FOMC

Commodity prices are pushing higher on the back of broad US Dollar weakness as the Fed begins its two-day policy meeting, with dovish commentary expected.

Talking Points

• Metal Prices Rise as Soft US Data Boosts Dovish FOMC Bets, Sinks Dollar

• Crude Oil Trades Above Resistance to Four-Month High, Eyes 99.00 Figure

Commodities are trading broadly higher as the US Dollar comes under broad selling pressure (as expected) as the Federal Reserve begins its two-day policy meeting. Ben Bernanke and company seem unlikely to introduce anything new into the policy mix after December’s major reshuffling. The rhetoric of the policy statement may take a stronger dovish tone however if the central bank sees a need to talk down expectations of an early unwinding of stimulus after the adoption of the “Evans rule”. A soft US data set seems to be amplifying the situation in the wake of disappointing consumer confidence and house price figures. More of the same appears likely ahead as traders factor expectations of a slower fourth-quarter GDP figures (to be unveiled tomorrow) into the equation. Output is forecast to rise 1.2 percent compared with the 3.1 percent increase in the three months through September 2012.

WTI Crude Oil (NY Close): $95.95 // +0.72 // +0.76%

Prices are testing above resistance at 97.41, with a push above this barrier aiming for 98.99. Near-term rising trend line support is at 95.96. A break below that exposes 94.61.

Commodities_Crude_Oil_Gold_Rise_as_US_Dollar_Weakens_Before_FOMC_body_Picture_4.png, Commodities: Crude Oil, Gold Rise as US Dollar Weakens Before FOMC

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1667.95 // -17.90 // -1.06%

Prices are testing major rising trend line support dating back to mid-May (1652.69). A break below that aims for the January 4 low at 1625.69 and a falling channel bottom at 1605.29. Near-term resistance is at 1690.39, the 38.2% Fibonacci retracement.

Commodities_Crude_Oil_Gold_Rise_as_US_Dollar_Weakens_Before_FOMC_body_Picture_3.png, Commodities: Crude Oil, Gold Rise as US Dollar Weakens Before FOMC

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $31.66 // -0.60 // -1.86%

Prices are bouncing from support at 30.66, the 23.6% Fibonacci retracement. Initial resistance is at 31.56, the 38.2% level, with a break above that exposing the 50% level at 32.29. Alternatively, a reversal below support exposes the 30.00 figure and a falling channel bottom at 29.32.

Commodities_Crude_Oil_Gold_Rise_as_US_Dollar_Weakens_Before_FOMC_body_Picture_2.png, Commodities: Crude Oil, Gold Rise as US Dollar Weakens Before FOMC

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.676 // -0.008 // -0.22%

Prices are consolidating below falling trend line resistance set from early September 2012 (now at 3.740). Rising trend line support is at 3.646, with a break below that targeting swing lows at 3.600 and 3.522. Alternatively, a push above 3.742 exposes the January 2 high at 3.758.

Commodities_Crude_Oil_Gold_Rise_as_US_Dollar_Weakens_Before_FOMC_body_Picture_1.png, Commodities: Crude Oil, Gold Rise as US Dollar Weakens Before FOMC

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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