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Crude Oil Benefits from Economic Outlook, Gold Supported by Weak Dollar
Written by article default Monday, 11 October 2010 08:23
Commodities – EnergyCrude Oil Benefits from Economic Outlook
Crude Oil (WTI) - $83.32 // $0.66 // 0.80%
Commentary:Crude oil is kicking off the new week with more gains as optimism surrounding the global economy continues to permeate the financial markets. Now that U.S. petroleum inventories are showing some signs of falling from their extremely elevated levels, that is only adding more fuel to the fire for crude oil prices. This next week will likely be influenced primarily by the push-and-pull of upside momentum and profit taking considerations. While there are some economic releases of note, there is nothing that can really turn the tide. Bears need an unexpected shoe to drop if they want to see a significant decline in asset prices, crude oil included. Otherwise, the trend is higher with dips seen as buying opportunities.
Technical Outlook:Prices are showing a well-defined Bearish Engulfing candlestick pattern following a test of resistance at Augusts’ swing high ($82.97), hinting that a move lower is ahead. A break below initial support at $81.20 – the 23.6% Fibonacci retracement of the latest upswing – exposes the 38.2% and 50% levels at $79.21 and $77.60, respectively.
Commodities – Metals
Gold Supported by Weak Dollar
Gold - $1352.22 // $5.49 // 0.41%
Commentary:Gold just won’t stop, as the metal is up another $6 after adding $28 last week. Gold continues to hit new record after record, spurred by a sinking U.S. Dollar and long term concerns regarding sovereign debt and fiat currencies. We see little change to the outlook. For those traders that wish to get involved, approach the metal from the long side, while ensuring to have a robust exit strategy in case things turn in a hurry.
The best proxy exposure to gold in the currency markets continues to be short U.S. Dollar positions. USD/CHF in particular has offered a very strong inverse relationship with gold in both the daily and intraday timeframes. A short USD/CHF position could then be considered a good proxy for a long gold position at this time.
Technical Outlook:In a similar fashion to oil, gold prices have formed a Bearish Engulfing candlestick pattern following a test of resistance at the top of a rising channel outlining price action since the beginning of the year, hinting a downward reversal is ahead. A break past initial rising trend line support – now at $1330.61 – exposes a longer term trend line set from July’s swing bottom (now at $1294.12).
Silver - $23.41 // $0.15 // 0.66%
Commentary:Silver is going parabolic, hitting new 30-year highs by the day. The metal is performing better than gold and that’s saying something. The gold/silver ratio took a dive last week, falling from 59.7 to 57.9, the lowest such level since September 2009. (The gold/silver ratio measures the relative performance of the two precious metals. A higher ratio indicates that gold is outperforming, while a lower ratio indicates that silver is outperforming.)
Technical Outlook:Silver prices have stalled below the $24.00 figure, seemingly negating a Bearish Engulfing candlestick pattern but failing to resume their climb. Negative RSI divergence hints at losses ahead. Initial support lines up at $22.50, with a break below that clearing the way for a move below the $22.00 figure to challenge $21.80.
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