Commodities: Risk-Driven Oil and Copper Rally at Risk on US Data, Fed

Crude oil and copper are aiming higher amid a pick-up in risk appetite but US retail sales data and minutes from October’s FOMC meeting may undermine prices.

Talking Points

  • Crude Oil, Copper Rise as China’s New Leadership Structure Begins to Emerge
  • Gold and Silver Underperform as US Dollar Outpaces Yen in Risk-On Trade
  • US Retail Sales Drop, FOMC Minutes May Undermine Sentiment in US Hours

Growth-geared crude oil and copper prices are on the upswing as risk appetite firms across financial markets. Sentiment began to firm in Asia as China’s leadership structure began to crystallize following the conclusion of the 18th Communist Party Congress. Vice President Xi Jinping and Vice Premier Li Keqiang were reportedly reappointed to the Party’s Central Committee, putting them in a position to take the reins and thereby reinforcing the markets’ status quo scenario for who would be in charge of the world’s second-largest economy for the next decade.Gold and silver are trading little-changed as the US Dollar manages to hold up, with cross-currency flows from a sharp pickup in USD/JPY a possible source of support gor the greenback.

S&P 500 stock index futures are pointing firmly higher, arguing for more of the same ahead. The landscape is not without its pitfalls however. October’s US Retail Sales report may dent investors’ chipper mood, with economists pencilling in a 0.2 percent contraction to mark the first negative print in four months. Separately, the Federal Reserve will release minutes from October’s policy meeting. Traders will look for guidance on implementation of the central bank’s QE3 program considering the size of its balance sheet has remained relatively little-changed despite the onset of MBS purchases. Signs pointing to more of the same ahead will dent hopes for a pickup in US performance on the back of easing efforts, which could prove likewise negative for sentiment.

WTI Crude Oil (NY Close): $85.38 // -0.19 // -0.22%

Prices continue to hover above the 50%Fibonacci expansion at 83.76.A break below that exposes 80.00 figure and the 61.8% level at 7978. Resistance is at 87.66, marked by the 38.2% Fib and reinforced by a falling trend line set from the September 14 high. A push above that aims for the 90.00 figure and the 23.6% expansion at 92.53.

Commodities_Risk-Driven_Oil_and_Copper_Rally_at_Risk_on_US_Data_Fed_body_Picture_3.png, Commodities: Risk-Driven Oil and Copper Rally at Risk on US Data, Fed

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1725.45 // -3.20 // -0.19%

Prices are testing resistance at 1732.33, the 23.6% Fibonacci retracement. A push above that targets the 1790.55-1802.80 area. Near-term support is at 1693.06, the 38.2% Fib, a barrier reinforced by a rising trend line set from late June (now at 1685.45). A drop beneath the latter level targets the 50% Fib at 1661.32.

Commodities_Risk-Driven_Oil_and_Copper_Rally_at_Risk_on_US_Data_Fed_body_Picture_4.png, Commodities: Risk-Driven Oil and Copper Rally at Risk on US Data, Fed

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $32.49 // +0.08 // +0.25%

Prices edged above resistance at 32.36, the 38.2% Fibonacci retracement, exposing the 33.51-66 area marked by the 23.6% level and a former range bottom as the next upside objective. The 32.36 level has been recast as support, with a drop back below that targeting the 38.2% Fib at 31.43.

Commodities_Risk-Driven_Oil_and_Copper_Rally_at_Risk_on_US_Data_Fed_body_Picture_5.png, Commodities: Risk-Driven Oil and Copper Rally at Risk on US Data, Fed

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.472 // +0.004 // +0.12%

Prices are testing support at a rising trend line set from early October 2011 (3.401). A break downward initially targets horizontal support at 3.300. Near-term resistance is at 3.526, the 23.6% Fibonacci retracement, with a piercing above that exposing the 38.2% level at 3.585.

Commodities_Risk-Driven_Oil_and_Copper_Rally_at_Risk_on_US_Data_Fed_body_Picture_6.png, Commodities: Risk-Driven Oil and Copper Rally at Risk on US Data, Fed

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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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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