Talking Points

• Crude Oil Likely to Decline as S&P 500 Index Futures Point to Risk Aversion
• Gold Down as US Dollar Mounts Aggressive Recovery to Start Trading Week

WTI Crude Oil (NY Close): $93.32 // -0.64 // -0.68%

Crude oil continues to reflect broad-based sentiment trends, with the WTI contract still showing a firm correlation with the S&P 500. This points the way lower as futures tracking the benchmark index trade aggressively lower ahead of the opening bell on Wall Street, hintingthe rout that began in Asia and carried over into early European trade is set to continue.

Some profit-takingon risk-linked assetsafter the sharp advance in the aftermath oflast week’s EU summit was to be expected, but the currentmoveseems to be at least equally reflective of protective repositioning as traders brace for a weekpacked with fundamental event risk. Chicago PMI and the Dallas Fed Manufacturing Activity Index releases headline the docket for today.Conflicting outcomes are expected, with the former reading pointing to a narrow deterioration in the pace of regional manufacturing- and service-sector growth while the latter, which focuses exclusively on the factory sector, signals a narrow improvement in October. The figures will help set the stage for the higher-profile ISM survey readings as well as the closely-watched Nonfarm Payrolls jobs report due later in the week.

Similar to theS&P 500, prices formed a Hanging Man candlestick below resistance at $94.87, the 50% Fibonacci retracement barrier. A selloff from here sees initial support at $90.17, the 38.2% Fib, with a break below that exposing $85.33 and $79.62.

Spot Gold (NY Close): $1743.75 // -1.10 // -0.06%

Gold came under pressure as the recoveryaggressive recovery in the US Dollar on renewed safe-haven demand amplified by Japan’s intervention into the USDJPY exchange rate amounted to a de-facto headwind for the yellow metal. The sharp losses seen on S&P 500 stock index futures heading into North American trade promise more of the same.

Sizing up the technical landscape, prices put in a Doji candlestick below support-turned-resistance at $1745.15, with a subsequent decline on pace to complete a bearish Evening Star pattern. Initial support stands at the $1700 figure, the now familiar range top established in late September, with a break below that exposing the 23.6% Fibonacci extension at $1660.81.

Spot Silver (NY Close): $35.32 // +0.22 // +0.62%

As with gold, silver is edging lower on the back of the sharp rebound in the US Dollar. Resistance has been found at $35.12, the 50% Fibonacci retracement, with prices turning lower toward support at the 38.2% level ($32.98). Alternatively, a reversal higher exposes the 61.8% Fib at $37.25.

---Written byIlya Spivak, Currency Strategist forDailyfx.com

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