June 2009
Daily Commodities Fundamentals: Commodity Prices Decline As Dollar Gains, Equities Sell Off
June 22, 2009 at 4:15 pm by CFDTrading Analyst · Leave a Comment
Commodities – Energy
Crude Prices Fall As Expectations For Lower Demand Weighs On Prices
Crude Oil (WTI) $67.240 -$2.780 -3.97%
Crude prices plummeted, fast approaching the psychologically significant resistance of $65 a barrel as equities sank for the session. While there are numerous fundamental reasons for crude prices to continue to decline, there are countervailing factors that will offset such moves. Factors in favor of lower prices are stockpiles near decade highs, readjustment of expectations for further economic contraction, and continued production levels from OPEC countries. On the other hand, dollar weakness, a resurgence in growth in some parts of the world, and political turmoil in major oil producer countries continue to stand in favor of higher prices. The US dollar will likely remain at lower parity to its counterparts for some time as record deficits are juggled with continued contraction in the economy. Meanwhile mounting violence and protests in Iran threaten to disrupt supplies. While these disruptions would more than likely be offset by the large amount of stockpiles on hand, turmoil will likely still be priced in and offer support for prices. In turn, the push and pull between these factors will likely drive crude prices to range between major resistance levels of $65 and $73 a barrel for the near-term.
Commodities – Metals
Safe-haven Metals Continue Declines On Dollar Strength, Muted Inflation
Gold $922.800 -$13.400 -1.43%
Gold prices continued to decline for the day as the equities sold off on expectations of protracted weakness and the dollar gained. While gold prices have fallen substantially for the past three weeks, fundamentals continue to point to gains in the coming months. Inflationary pressures, though currently subdued, will likely emerge as a recovery takes hold providing longer-term support for the metal. Meanwhile record deficits juggled during a continued recession will likely maintain lower US dollar parity to its counter-parts for some time. Both of these factors stand in favor of higher gold prices. Expect gains for the near to medium term.
Silver $13.7350 -$0.4650 -3.27%
Silver prices declined following steep equity selloffs. Prices will likely decline further if expectations for further economic contraction comes to fruition. The metal has rallied considerably since the start of 2009 largely on expectations for a recovery. As such a pullback in sentiment could mean a sharp pressure on prices, offsetting any major gains from its safe-haven status. Nonetheless, safe-haven gains will still boost prices somewhat. Expect modest gains for the near-term.
-Written by Stefan Tifigiu, CFDTrading Research
Questions/Comments about this article? Send them to Stifigiu@fxcm.com
European Stocks Fall as Commodities Continue Weakness on Outlook
June 22, 2009 at 12:29 pm by CFDTrading Analyst · Leave a Comment
Europe Session Key Developments
• Commodities Fall as Outlook on Recovery Dims
• Positive Comments by Officials Fails to Raise Markets
European Markets closed lower across the board as declines in commodity prices sapped miners and basic materials firms while traders sold recent gains in other sectors as optimism remains muted. The Washington-based World Bank today added to bearish sentiment in revising its estimate on global contraction to 2.9% in 2009 from 1.7% earlier in March. Since the previous forecast, markets have rallied significantly and indicators have pointed to moderating deterioration. Trade has also improved with the baltic dry index at its best levels since September. The IMF went as far as to suggest it will revise upward its earlier grim contraction estimate while today’s lower revision by the World Bank suggests market rallies and optimism are not going to contribute enough to a speedy recovery. Indicators are starting to echo that tone with releases showing signs of weakness today. April industrial orders in Italy surprised with a considerable fall that escalated the YoY contraction to 32.2%. Also keeping investors on high alert is a report by Rightmove that UK house prices fell 0.4% in June, the first decline in five months. Prices had been growing as record low rates on mortgage and prices created renewed demand. These signals indicate that recovery may be prolonged as future direction remains uncertain. Also released today was German IFO data, which showed expectations on the future increased at a faster pace than expected while current assessment fell slightly versus a Bloomberg consensus for improvement. Conditions remain poor in the Euro-Zone and with unemployment continuing to rise, it remains to be seen how quickly economies come out of recession. ECB member, and Austrian central bank head, Ewald Nowotny commented that the ECB would most likely leave the rate unchanged until 2010 at the earliest. The German Bundesbank, meanwhile, commented that Germany will stabilize this year with contraction still forecast at a sharp 6.2% before growth commences in the following year. Politicians remain optimistic on the year ahead while remaining quite pessimistic on the current fiscal year.
FTSE 100 4,234.05 -111.88 -2.57%
The British index closed sharply lower as all sectors fell with Oil & Gas down 4.46% and Basic Materials seeing a loss of 3.19%. Miner Anglo American rose the most at 4.62% bucking the losing trend seen in most stocks as competing firm Xstrata began discussion of a possible merger to create a firm rivaling BHP Biliton and Rio Tinto. UK airliner British Airways, meanwhile, fell the most at 8.65% as billionaire Richard Branson says Virgin Airlines will not bid to save the company. Other companies seeing considerable declines were mining firms including Vedanta and Lonmin with losses of more than eight percent while others including Kazakhmys and Antofagasta fell more than seven percent each.
CAC 40 3,123.25 -98.02 -3.04%
The French index closed lower by more than three percent as Technology and Basic Materials sectors fell more than five percent along with declines in all sectors. The largest decline was seen in a 8.57% fall in telecom technology firm Alcatel-Lucent as Bank of America cut its rating on the stock to “underperform.” Also falling sharply was automaker Renault, down 7.86% and a 6.88% drop in shares of ArcelorMittal as commodities tumble.
DAX 4,693.40 -146.06 -3.02%
The German market closed down more than three percent with all sectors in decline ranging to a maximum of 4.45% seen in Financials. Commerzbank fell the most at 6.98% while Deutschebank also closed down 6.79%. Investors have been selling financials as the group has risen significantly since March lows. Prospects for a quick turnaround are dimming along with confidence in the housing market, vital factors to future loan losses at major banks. Other firms dragging the index down include utility E.On, engineering firm Siemens, and insurer Allianz, all down more than three percent.
IBEX 35 9,338.50 -242.40 -2.53%
The Spanish market fell the least of the five majors today and, following the sharp declines in the majors today, remains the only index higher on the year-to-date period. All sectors moved lower today while only one stock closed marginally higher. Telecom saw the least weakness with a sector move of 0.58% to the downside while Basic Materials and Industrials fell more than four percent each. Wind turbine maker Gamesa saw the sharpest drop at 7.19% following by steelmaker ArcelorMittal down 6.43%.
S&P/MIB 18,541.30 -806.68 -4.17%
The Italian index fell the most of the five majors with a decline of over four percent as all sectors fell with Utilities falling sharply by 8.87% and Basic Materials down more than seven percent. Electricity company Enel fell the most at 11.33% following a dividend payment and the success in a sale of an 8 billion euro rights offer. Also falling more than ten percent were shares of competing utility firm A2A. Index point declines were lead by Enel and Unicredit, which fell 5.03% into the close.
Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com
Dow Losses May Continue With Possible Test of 8,250
June 22, 2009 at 7:55 am by John Rivera · Leave a Comment
Staying above 8227 keeps the near term trend pointed up. The rally from 6470 to 8588 was in 3 waves (wave W) and the decline to 8221 was a small expanded flat. The break above 8588 confirms that wave C is underway. A likely target area is where wave C would equal wave A; which is near the 50% retracement of the decline from the 2007 high; at 10334.
The Dow has started to consolidate near former resistance at 8522 – 38.2% Fibo of 9,795 – 6,464. The 200-Day SMA has started to limit upside potential increasing the chances of a test of support at 8,250.
The S&P count is the same as the Dow count. A B wave is complete at 879. A target is 1142 (100% extension) and the index should remain above 879 now.
The S&P 500 continued to trade above support at the 200-Day SMA at 898 which could lead to a reversal and a re-test of 943 the January 6th high. If the broader index fails to break above resistance then a drop to support at 880 is likely.
The Nasdaq is in the same position as the other US indexes. The index should remain above 1664 on its way to a test of the 50% to 61.8% retracement area of the decline from 2862. This zone is 2063 to 2251. The 100% extension of the rally from 1264-1773 is in this zone at 2172.
The Nasdaq has found support at 1,800 but it may take a move above resistance at 1,868-50.0% Fibo of 2,474-1,265 to eliminate a possible test of support as 1,665.
European Stocks Find Near-Term Support, Stage Shallow Rebound
June 22, 2009 at 1:25 am by Ilya Spivak · Leave a Comment
FTSE 100
Long-Term Technical Outlook
The FTSE is at risk of at least a pullback if not an outright reversal as daily RSI has rolled over from overbought territory. The rally from 3461 is likely to extend much higher over the summer months. But, will the advance carry more or less in a straight shot from current levels or will a pullback occur before the next advance? Remaining above 4295 keeps the FTSE 100 on a path towards 5106-5495 (50% and 61.8% of previous decline). A drop below 4295 would lead to a deeper decline in what is probably a B wave.
Short-Term Technical Outlook
The FTSE has found tentative support at 4270.63, the 23.6% Fibonacci retracement level. A break lower targets the intersection of the 50% Fib and the 100-day moving average.
DAX
Long-Term Technical Outlook
The DAX pattern is the same as that of the FTSE 100. Staying above 4653 keeps the index headed higher towards 5870-6409. These levels are defined by the 50% and 61.8% retracements of the decline from the 2007 high. The 100% extension of the first leg of the advance (wave A, from 3589-4980) is in this zone at 6045.
Short-Term Technical Outlook
German shares have surpassed support at the bottom of a rising channel and are now testing 48066, the 23.6% Fibonacci retracement level. A break lower will target the 38.2% Fib at 45759.
CAC 40
Long-Term Technical Outlook
The decline from the 2007 high in the CAC 40 is in 5 waves and either wave 1 or 5 is extended. It seems more probably that wave 5 is the extended wave because if wave 1 were extended then wave 2 would be uncommonly small. Either way, the index is most likely headed significantly higher over the next several months. The target zone is the former 4th wave, which is 441-5142. The 61.8% is in the middle of this zone at 4754. Near term, staying above 3115 keeps the trend pointed up. Coming under there would lead to a deeper decline in what is probably a B wave.
Short-Term Technical Outlook
The French benchmark index has broken below the lower boundary of a rising channel. Prices now testing support / resistance at 313490, with a break lower targeting the 100-day moving average at 301057.
IBEX 35
Long-Term Technical Outlook
Same story with the IBEX 35. The rally from the low (6703) is corrective but has more room to run. Staying above 8829 keeps wave C headed higher towards 1137-1247. This zone is defined by the 50%-61.8% retracements of the decline from the 2007 high. Wave C would equal wave A near the lower end of this zone at 1159.
Short-Term Technical Outlook
The IBEX 35 has confirmed a double top at 97240 with a break below support at the bottom of a rising channel. Prices found near-term support at the 14.6% Fibonacci retracement and rebounded to re-test the broken channel’s lower boundary. A resumption of bearish momentum from here aims at the 23.6% Fibonacci retracement level (90279).
S&P/MIB
Long-Term Technical Outlook
The FTSE MIB (Milan) index took the same structure as the CAC 40 on the way down from its 2007 high. The index is currently testing the 200 day SMA, which should give way as the target zone for the index is not until 30062-34711 (former 4th wave….wave 5 is extended). Remaining above 18752 keeps the trend pointed higher. Coming below there would lead to a deeper decline (next support would be 17133) before the next leg up.
Short-Term Technical Outlook
Italian shares have broken below support at 19479.98, the 14.6% Fibonacci retracement level, to pause at the 23.6% Fib mark. A break lower from here targets the 38.2% Fib at 17504.66.
Commodities Daily Fundamentals: Crude Pulls Back From Multi-Month Top While Metals Fall For Third Week
June 19, 2009 at 4:35 pm by CFDTrading Analyst · Leave a Comment
Commodities – Energy
Crude Falls as Concerns Remain High Against Quick Economic Turnaround
Crude Oil (WTI) $69.65 -$1.72 -2.41%
Crude prices fell below $70 per barrel into the close following a strong start that saw the commodity above $72 early in the trading session. Fundamental forces including a weaker US dollar and rising equity markets helped lift oil higher in the morning as optimism lingered on a quick recovery to the global recession, despite equity markets falling by several percentage points this week in Asia, Europe and the US. Economic indicators were of minimal impact to traders today while several signs remain that could impede upside in the commodity. Since hitting a low of 43.83 on April 21, the commodity rose in a significant uptrend of more than 60% to the highest level since mid October. Events that would have created shocks in oil markets last year, such as terrorist pipeline cutoffs in Nigeria, appear to have little effect on prices while Iran sees the largest protests since the 1979 revolution and North Korea continues to test global attitudes with its hostile tone and missile tests. Shocks that could be created from calamity in these theatres appear to be of minimal importance as OPEC nations can make up for any shortfall with excess production capacity at the highest in years. Stockpiles have fallen but remain relatively high while concerns following a sharp rise in gasoline costs has traders worrying over demand in the months ahead. While the short-term picture appears difficult, predictors of long-term movement remain upbeat as the IAE’s upgrade to oil demand expectations was followed today by the World Bank raising its growth forecast on China to 7.2% from 6.5%. Mixed signals and shaky confidence in OPEC’s ability to control its members could hinder further advances in the price of crude.
Commodities – Metals
Safe-haven Metals Decline for Third Week As Inflation Risk Remains Muted
Gold $935.500 +$0.90 +0.10%
Gold prices showed little change while closing lower for the third consecutive week as inflation concerns remain low and long-term fiscal prudence likely following commentary by politicians and the G8 meeting last weekend. Trading in the week was weighed by several factors including a generally stronger US Dollar. Chief among concern remains inflation in the short-term and concern in the years ahead as governments have pumped increases in money supply and record fiscal spending to propel a resurgence in spending. Recent political comments and the G8 meeting in the last week have made clear that governments are concerned over the potential problem while working towards “exit plans” on fiscal spending measures enacted. Consumer price reports this week also kept traders away from the alternative store of value as data showed inflation risk remains low while the US annualized CPI fell 1.3% from the year ago. Price for the metal may continue to fall closer to $900 in the weeks ahead as the downtrend continues.
Silver $14.190 -$0.05 -0.35%
Silver prices closed slightly lower, also with a loss for the third consecutive week, as equity markets pared morning gains to close mixed. Investors remain concerned on economic recovery and US markets, which saw the Dow Industrials rally in the past four weeks, have closed lower this week across the three main indices. Should unemployment continue to rise and dent economic outlook, silver is likely to fall quicker that gold as the metal’s industrial use would decline. The metal has rallied considerably since the start of 2009 and has also pulled back sharply from a high of over $16 per ton early in June.
-Written by Roman Kadinsky, CFDTrading Research
Questions/Comments about this article? Send them to Rkadinsky@fxcm.com
European Stocks Close Higher as Commodities Rebound Off Sharp Declines
June 19, 2009 at 1:12 pm by CFDTrading Analyst · Leave a Comment
Europe Session Key Developments
• Commodities Climb Following Significant Selloff
• UBS Upgrades European Utilities Ratings
European Markets closed in positive territory for the second session as opportunities appear to grow follow significant movement in the indices over the past several days. Concern in financials was high this week as the ECB reported banks may lose $283 billion through 2010 on loans while the S&P downgraded 22 US banks’ debt ratings along with fears on regulatory reforms being considered by American and European officials. Also seeing a sharp decline in recent sessions were mining and basic materials / industrial sectors as commodity prices feel from recent highs and investors remained skeptical of a quick turnaround in the global recession. Indicator releases continue to show deteriorating is moderating and several signs of growth are starting to emerge. Improvements in housing, seen as vital to stability in financials as well as lending and spending, have been noted as house prices rise in the UK alongside increases in loans. Also on traders minds today was a quadruple witching involving options and futures on stocks and indices. Volatility is typically associated with these events but trading today was clearly higher following a slow start in the open. Overall, markets remain not far from recent highs and while there has been positive movement in the past two sessions, further downside remains a very real threat.
FTSE 100 4345.93 +65.07 +1.52%
Trading in the UK market led to the second highest close of the five majors as three heavily beaten down sectors closed up more than two percent. Basic Materials, Utilities and Oil & Gas all gained following downside pressure early in the week as commodity prices declined. Cruise line operator Carnival led advancers at 6.17% following an upgrade to outperform at Wachovia. Insurer Aviva was close behind with a 5.81% gain as Deutsche Bank issued a sector note on insurers and upgraded price targets for several firms. Mining firms also saw rebounds today following sharp drops this week. Platinum producer Lonmin advanced 5.57% while Xstrata gained 4.05%. British Petroleum led the index point advance as oil stabilized above $71 per barrel and traders sent the stock higher by 2.47%.
CAC 40 3,221.27 +27.21 +0.85%
Trading in the French index led to a higher close of nearly one percent as nine of the ten sectors advanced with Basic Materials and Technology leading at more than two perfect while Financials, the only loser on the day, fell a miniscule 0.03%. World’s largest steelmaker ArcelorMittal gained the most on the session at 4.97% as commodities rebounded and a report surfaced that the firm is saving on technology costs. Utility Veolia Environnement also advanced considerably by 4.20% as Swiss bank UBS raised its rating on European utility companies due to attractive dividend yields.
DAX 4,839.46 +1.98 +0.04%
The German market closed with the smallest gain of the five majors as three of the nine sectors fell along with less stocks closing up than those closing lower. Utilities provided the largest gain at 2.73% for the sector while Consumer Goods fell the most at 1.97%. All other sectors showed minimal movement of less than one percent in either direction. Power company E.On led advancers at 3.86% on UBS’ sector upgrade to utilities, followed by a 2.74% move in steelmaker Salzgitter as commodities rebounded. Downside was considerable in several large firms including Deutsche Bank, down 1.67% on the session. Automakers also suffered today with all three German firms lower. Volkswagon led laggers at 3.03%, while Daimler fell 2.65% and BMW declined 1.48%.
IBEX 35 9580.90 +196.90 +2.10%
The Spanish market led gains today with positive movement seen in eight of the nine sectors while Technology fell 1.45% at the close while Financials rallied 3.74% and Basic Materials climbed 2.79%. Nearly nine companies rose for every one in decline. Gas Natural led advancers by 5.89% as utilities received upgrades by UBS and commodities recovered from recent losses. Also gaining more than five percent on the session was wind turbine maker Gamesa and construction firm Acciona.
S&P/MIB 19,347.98 +114.19 +0.59%
Italian equities closed higher by more than half of one percent as seven of the nine sectors gained while financials led the decline but by only 0.37%. Utilities rallied 3.40% as the sector gained from a UBS upgrade. Utility company Enel led advancers at _% as the company plans to complete the purchase of a 25 percent stake in Endesa on June 25 in a deal with Spanish construction firm Acciona. Also rising considerably, despite a sector decline, was bank UBI at a 4.48% gain as the company is in the midst of lowering debt from convertible bonds. Other financials meanwhile closer lower including Banco Popolare, Intesa Sanpaolo, and insurer Fondiaria.
Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com
European Markets Find Tentative Support, Outlook Remains Bearish
June 19, 2009 at 1:04 am by Ilya Spivak · Leave a Comment
FTSE 100
Long-Term Technical Outlook
The FTSE is at risk of at least a pullback if not an outright reversal as daily RSI has rolled over from overbought territory. The rally from 3461 is likely to extend much higher over the summer months. But, will the advance carry more or less in a straight shot from current levels or will a pullback occur before the next advance? Remaining above 4295 keeps the FTSE 100 on a path towards 5106-5495 (50% and 61.8% of previous decline). A drop below 4295 would lead to a deeper decline in what is probably a B wave.
Short-Term Technical Outlook
The FTSE has broken below support / resistance at 4307.61. From here, prices are now aiming at the 100-day moving average at 4109.84.
DAX
Long-Term Technical Outlook
The DAX pattern is the same as that of the FTSE 100. Staying above 4653 keeps the index headed higher towards 5870-6409. These levels are defined by the 50% and 61.8% retracements of the decline from the 2007 high. The 100% extension of the first leg of the advance (wave A, from 3589-4980) is in this zone at 6045.
Short-Term Technical Outlook
German shares have surpassed support at the bottom of a rising channel and are now testing 48066, the 23.6% Fibonacci retracement level. A break lower will target the 38.2% Fib at 45759.
CAC 40
Long-Term Technical Outlook
The decline from the 2007 high in the CAC 40 is in 5 waves and either wave 1 or 5 is extended. It seems more probably that wave 5 is the extended wave because if wave 1 were extended then wave 2 would be uncommonly small. Either way, the index is most likely headed significantly higher over the next several months. The target zone is the former 4th wave, which is 441-5142. The 61.8% is in the middle of this zone at 4754. Near term, staying above 3115 keeps the trend pointed up. Coming under there would lead to a deeper decline in what is probably a B wave.
Short-Term Technical Outlook
The French benchmark index has broken below the lower boundary of a rising channel. Prices now testing support / resistance at 313490, with a break lower targeting the 100-day moving average at 301057.
IBEX 35
Long-Term Technical Outlook
Same story with the IBEX 35. The rally from the low (6703) is corrective but has more room to run. Staying above 8829 keeps wave C headed higher towards 1137-1247. This zone is defined by the 50%-61.8% retracements of the decline from the 2007 high. Wave C would equal wave A near the lower end of this zone at 1159.
Short-Term Technical Outlook
The IBEX 35 has confirmed a double top at 97240 with a break below support at the bottom of a rising channel. From here, prices aim at the 23.6% Fibonacci retracement level (90279).
S&P/MIB
Long-Term Technical Outlook
The FTSE MIB (Milan) index took the same structure as the CAC 40 on the way down from its 2007 high. The index is currently testing the 200 day SMA, which should give way as the target zone for the index is not until 30062-34711 (former 4th wave….wave 5 is extended). Remaining above 18752 keeps the trend pointed higher. Coming below there would lead to a deeper decline (next support would be 17133) before the next leg up.
Short-Term Technical Outlook
Italian shares have broken below support at 19479.98. The next level of support lines up at 18726.68, the 23.6% Fibonacci level.
Stocks Break Losing Streak, Gaining Modest Amount
June 18, 2009 at 8:38 pm by CFDTrading Analyst · Leave a Comment
US Session Key Developments
· Continuing Jobless Claims Ease in May
· Research in Motion Beats Earnings Estimates
Stocks Break Losing Streak, Gaining Modest Amount
Stocks broke a three-day losing streak today after Continuing Jobless Claims data showed that the recession may be bottoming. Indeed, the number of those claiming unemployment benefits shrunk in the week ending June 6. Research in Motion beat estimated earnings by 4 cents per share, reporting a 98 cents per share earnings for the first-quarter. NASDAQ stocks as a whole, however, failed to finish in the green. Bank shares rallied ahead with JPMorgan and Bank of America finishing ahead at least 4.40% each.
Dow 30 8555.60 +58.42 +0.69%
The Dow had a very mixed day, with Industrials, Energy, and Technology all finishing the day down. Consumer Goods, however, surged ahead 3.05% with Kraft moving head nearly 4.0%.
SPX 500 918.37 +7.66 +0.84%
Banks allowed the S&P 500 to finish the day ahead, with Bank of America surging ahead 4.88% ofter speculation emerged that they would be repaying their TARP money in the near future. As a group, Financials beat all the major indices, finishing up by 2.42%.
NAS 100 1807.72 -0.34 -0.02%
Tech stocks closed down despite Reserach In Motion’s surprise earnings estimates, which came in better than forecast. The Tech sector as a whole was very mixed with big names such as Microsoft closing down while companies like Oracle finished ahead.
Commodities Daily Technicals: Crude Pulls Back After Hitting Multi-Month Trend Channel
June 18, 2009 at 5:46 pm by David Rodriguez · Leave a Comment
Short-term Technical Outlook For Crude Oil
Short-term Technical Outlook For Gold
Short-term Technical Outlook For Silver
Commodities Daily Fundamentals: Crude Gains, Safe-Havens Stall On Dollar Rebound
June 18, 2009 at 5:02 pm by CFDTrading Analyst · Leave a Comment
Commodities – Energy
Crude Continues Gains Following News Taken To As Further Sign Of Recovery
Crude Oil (WTI) $71.260 +$0.240 +0.32%
Crude prices gained for the day as markets reacted positively to better than expected economic releases. Continuing Claims, Leading Indicators and the Philadelphia fed all showed better than expected returns. However, upon closer inspection, these releases provide little to justify any major gains in crude prices. Continuing Claims does not account for those who have run out of unemployment benefits and while manufacturing showed a much better result than anticipated, it still points to further contraction. There are a few factors that support higher crude prices however. Among them, the US dollar is likely to remain weaker to other currencies for some time as deficits are beginning to weigh in on the dollar’s appeal as a safe-haven vehicle. In turn, the conditions for extended dollar weakness will likely continue on for some time and as such support crude prices at higher levels. Some also point to political turmoil as a reason for higher prices. Supply shocks from such events could ,but it is doubtful that such disruptions will be large enough to cause spikes in prices. This is because global economic activity will remain subdued and drive crude demand to hang about at very low levels. Supplies remain elevated and with crude production rates being maintained by major suppliers, this should keep stockpiles high. Supply shocks will have little effect since crude demand will likely remain low since most major economies remain in contraction. In turn, these conflicting factors will likely lead crude prices to range between major resistance levels of $65 and $75 for the medium term.
Commodities – Metals
Safe-haven Metals Decline As Dollar Continues Gains
Gold $934.300 -$1.5000 -0.16%
Gold prices declined toward the middle of the US session as the US dollar swung sharply from previous declines. Dollar weakness and expectation for greater inflation will likely continue however and stand in favor of gold strength. At the moment, the dollar continues to show indecision in momentum and such oscilations could again lead to safe-haven outflows from the dollar. Gold prices will benefit from this in the near-term, but will also gain on expected inflationary risks. Although presently muted, capital injections are large enough to make inflation a substantial risk once a recovery takes full swing. A number of longer-term investors positioning to hedge against this will likely use gold to do so. As a result, prices can be expected to rise for the medium-term.
Silver $14.2200 -$0.1300 -0.98%
Silver prices gained as equity markets continued to decline. Gains will likely continue going forward but will be offset if the economy continues to show signs of contraction as silver is used in many industrial applications. However, if expectations turn such that economic activity will improve, silver has the potential to gain at a much faster pace than gold due to both effects of its safe-haven status and its industrial application. Expect modest gains for the near to medium-term.
-Written by Stefan Tifigiu, CFDTrading Research
Questions/Comments about this article? Send them to Stifigiu@fxcm.com
