Talking Points
WTI Crude Oil (NY Close): $90.20 // -2.97 // -3.19%
Crude oil remains anchored to broad-based risk sentiment trends as the WTI contract continues to show a firm correlation with the S&P 500. With that in mind, the path of least resistance appears to point higher as futures tracking the benchmark stock index trade up nearly 2 percent ahead of the opening bell on Wall Street.
The markets are feeling chipper afterEuro Zone leaders delivered what is being billed as the definitive plan to contain the debt crisis that has plagued the region since late 2009. In a nutshell, policymakers cajoled banks into wiping way 50 percent of Greece’s privately held debt and scraped together €130 billion in new aid; offered details on leveraging the firepower of the EFSF bailout fund to about €1-1.4 trillion, notably with the inclusion of help from the IMF; and set out the roadmap for bank recapitalization.
On the economic data front, all eyes are now on the third-quarter US Gross Domestic Product report. Expectations call for output to rise 2.5 percent in the three months through September, marking the strongest performance in a year. The outcome would confirm that the US recovery is gathering steam, warding off fears of a double-recession. Importantly, it is unclear whether the outcome will prove supportive for risk appetite in terms of improving the outlook for global growth or detrimental in that stronger US performance undermines the case for additional quantitative easing (so-called “QE3”). A flurry of third-quarter earnings releases including a report from oil giant Exxon Mobil is also on tap.
Looking at the technical picture, the broad outlines of positioning are little changed from what we noted yesterday. Prices put in a Shooting Star candlestick below resistance at $94.87, the 50% Fibonacci retracement of the drop from May’s swing high, pointing to a loss of bullish momentum and hinting a move lower is ahead. Initial support lines up at $90.17, the 38.2% Fib, with a break below that targeting the 23.6% and 38.2% extension levels at $85.33 and $79.62.
Spot Gold (NY Close): $1724.82 // +19.30 // +1.13%
Fear of a meltdown across financial markets following a would-be failure of EU policymakers to unveil an adequate debt crisis relief plan drove gold dramatically higher over recent days. It is not surprising then that the warm reception being given to theset of proposals that finally emerged out of Brussels earlier today is weighing on the yellow metal.
A strong showing on S&P 500 stock index futures hints more of the same ahead. With that in mind, while signs of celebration are evident across financial markets the response from the Euro is curiously muted.Indeed, while one would expect the single currency to be at the forefront of the relief rally, the EURUSD exchange rate is having noticeable trouble maintaining a grip on the 1.40 level. This hints that the initial elation from investors may give way as markets contemplate the still glaring lack of operation detail in most of the EU’s proposals, rekindling concerns and offering gold a bit of support.
Sizing up the technical landscape, prices are recoiling from resistance at $1726.60, the 50% Fibonacci retracement, with sellers aiming at support marked by the 38.2% level at $1680.78. Alternatively, a reversal through immediate resistance exposes the 61.8% Fib at $1772.42.
Spot Silver (NY Close): $33.39 // +0.13 // +0.38%
Silver is stalling as markets digest theEU debt crisis summit outcome. On the technical side of things, prices took out resistance at $32.67, the 38.2% Fibonacci retracement, exposing the 50% level at $34.72. The 38.2% Fib has been recast as near-term support.
---Written byIlya Spivak, Currency Strategist forDailyfx.com
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