Commodities Look to US GDP Data to Offset Euro Debt Crisis Jitters

DailyFX   |  April 27 2012 4:18 EDT

Commodity prices down as returning Eurozone debt crisis fears risk appetite, with the way forward from here hinging on the outcome of the US GDP report.

Talking Points

• Crude Oil, Copper to Follow Stocks Lower as Eurozone Debt Fears Return
• Gold and Silver Look to US GDP Report to Keep QE3 Expectations Alive

Commodity prices are down in early European trade as risk aversion grips financial markets following a Standard & Poor’s downgrade of Spain’s credit rating. Sentiment-linked crude oil and silver prices are following shares lower while gold and silver are facing de-facto selling pressure as the dour mood stokes safe-haven demand for the US Dollar. S&P 500 stock index futures are pointing sharply lower, hinting more of the same is on tap as Wall Street comes online.

On the economic data front, all eyes are on the first-quarter US Gross Domestic Product figures, where expectations point to a 2.5 percent annualized quarterly increase after a 3 percent rise in the three months through December.The result is likely to be interpreted in the context of this week’s FOMC policy meeting, with a better-than-expected outcome carrying the possibility of reminding traders that Ben Bernanke’s commentary was hardly as supportive of QE3 as the markets’ initial reaction suggested. Alternatively, a disappointing print will further fuel stimulus bets, which certainly seems supportive for precious metals but may also (somewhat counter-intuitively) help on the risk appetite front as well.

WTI Crude Oil (NY Close): $104.55 // +0.43 // +0.41%

Prices are showing a Shooting Star candlestick below resistance at 104.90, a former support level reinforced by the top of a falling channel set from early March. The setup warns of bullish exhaustion and hints a turn lower maybe ahead. Initial rising trend line support is now at 101.98.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1657.43 // +13.80 // +0.84%

Prices the top of a falling channel set from early March now at 1660.60, with a break higher exposing 1680.35. Support lines up at 1638.02, the 23.6% Fibonacci expansion. Absent a daily close above the channel top, the overall trend remains bearish.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $30.09 // +0.38 // +1.25%

Prices put in a Hammer candlestick above support at 30.23 and rebounded to retest a previously broken barrier at 31.11. A push above this exposes falling trend line resistance at 31.70. Alternatively, a reversal lower through immediate support targets the 30.00 figure.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.774 // +0.066 // +1.78%

Prices broke back above 3.713, a former support level recast as resistance, with bulls now aiming to retest the underside of a formerly broken Triangle formation (now at 3.816). The 3.713 level is support once again.

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

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