Talking Points

• Crude Oil to Rise as S&P 500 Futures Point to Rising Risk Appetite
• Gold, Silver May Recover as Safe-Haven Flows Leave US Dollar

WTI Crude Oil (NY Close): $96.92 // -0.49 // -0.50%

European shares and S&P 500 stock index futures are firmly inpositive territory, hinting crude oil is set to rise with a broad recovery in risk appetite. The rebound seems reasonable as traders digest yesterday’s broad-based selloff in the wake of the failure of the“super-committee” of 12 US Congressmen to come up with a deficit reduction plan by the self-imposed Monday deadline.

Indeed, the $1.2 trillion in automatic budget cuts triggered by the disappointing outcome are spread out over 10 years and don’t take effect until 2013, so the implications of the committee’s failure for the near-term economic growth outlook and risk appetite in general are slim at best. As such, it ought not be surprising thatrisk appetiterecovers over the near term, though clearly the larger headwinds found in the Eurozone debt crisis and the overall global slowdown remain and are likely to reassert themselves in the days ahead.

Turning to the chart setup, prices broke through rising trend line support set from the October 4 low having completed a well-defined Bearish Engulfing candlestick pattern below the 104 figure. Initial support from here stands at 95.56, with a break below that exposing 90.49. The trend line, now at 99.27, has been recast as near-term resistance.

Spot Gold (NY Close): $1677.32 // -46.63 // -2.70%

Gold continues to moves in the US Dollar, hinting the yellow metal is likely to recover over the near term as S&P 500 stock index futures point to a recovery in sentiment that saps demand for the benchmark currency. The overall outlook continues to favor the downside however as major headings from the Eurozone debt crisis and the overall global growth slowdown remain in place, hinting the greenback larger trajectory is to the upside.

Sizing up the technical landscape, pricesbroke through support at 1711.13, the 23.6% Fibonacci extension level, as well as the rising trend line set from the September 26 low. The bears now aim to challenge the 38.2% Fib at 1654.44. The trend line, now squarely at the 1700 figure, has been recast as near-term resistance.

Spot Silver (NY Close): $31.62 // -0.74 // -2.29%

As with gold, silver look so have scope for a rebound as risk appetite improves, weighing on the safe-haven US Dollar. Prices have found interim support at 31.39, the 23.6% Fibonacci extension level, with initial resistance lining up at the 33.00 figure. A break to the upside exposes 35.12, while a reversal back through immediate support exposes 28.74.

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

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