Talking Points
WTI Crude Oil (NY Close): $99.79 // +1.58 // +1.61%
Crude prices are followingEuropean stocksdownwardand S&P 500 stock index futures are trading lower, pointing to more of the same as Wall Street comes online. The selloff reflectsbroad-based risk aversion after adisappointing outcome to the first day of a summit of Eurozone finance ministers in Brussels.
Unexpectedly strong German Unemployment dataand a Euro Zone CPI reading at 3 percent added to selling pressure. The resultshintedit will be difficult to convince the administration in Berlin that an aggressive ECB bond-buying program – seemingly the most viable option to check the spread of sovereign stress – can be justified as a bulwark against deflationamid slowinggrowth rather than an outright bailout.
Looking ahead, the Fed Beige Book regional economic conditions survey as well as the US ADP Employment Change and Chicago PMI readingsare on tap. Economic data out of the world’s top economy has been steadily improving since June and consensus forecasts suggest more of the same with today’s batch of releases, but it is unclear to what extent these outcomes prove supportive as Eurozone debt crisis fears continue to weigh on sentiment in the immediate term.
On the technical front, prices are testing the top a range that has confined trade for the past two weeks at $100.26, with a break higher exposing the November 17 high at $103.35 followed by trend line support-turned-resistance at $103.50. Initial range bottom support remains at $94.56.
Spot Gold (NY Close): $1715.72 // +3.38 // +0.20%
The deterioration in risk appetite following a lackluster first day at the Eurozone finance ministers’ summit bodes ill for gold, driving safe-haven demand for the US Dollar and thereby putting de-facto downward pressure on the yellow metal.
Looking ahead, the Fed’s Beige Book ought to prove most interesting as investors continue to mull the possibility of a QE3 program, with any indication that such an outcome has become more likely boosting gold prices amid renewed inflation hedge demand. Alternatively, a neutral-to-optimistic reading of regional economic conditions will probably produce the opposite effect.
Prices are coming down off resistance at $1718.47, the 38.2% Fibonacci retracement level reinforced by former support at a rising trend line set from the September 26 swing long (now at $1728.23). Near-term support lines up at $1698.56, the 23.6% Fib, with a break below that exposing $1666.37.
Spot Silver (NY Close): $31.95 //-0.15 // -0.47%
As with gold, silver has come under pressure as risk aversion drivers a pickup in the US Dollar. Prices remain wedged below familiar range resistance at $33.04, with support at a rising trend line underpinning price action since late September (now at $30.81). A break lower initially exposes the $30.00 figure.
---Written byIlya Spivak, Currency Strategist forDailyfx.com
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