Talking Points:
- Oil finds support after Eurozone provisioned for a three-year Greek bailout
- Gold is heavily pressured by Greek resolution and Fed’s rate hike scenario
- Copper edges up as Chinese stocks rally
Crude oil prices are finding some support today after the Eurozone finance ministers agreed in principal to a new three-year bailout for Greece. WTI is up 0.61 percent and Brent is up 0.53 percent by noon time in Asia. Overnight, WTI lost 1 percent to settle near a three-month low on a Genscape’s report that inventories at Cushing delivery point had climbed nearly one million barrels since last Friday. Brent however ended the New York session higher due to news of a power outage at the UK’s largest oil field.
Nevertheless, dollar-denominated oil continues to bear the weight of a rising US dollar as market players are awaiting an interest rate hike by the Federal Reserve. A sentiment of oversupplies in global oil market also keeps prices down while investors assess the implication of additional Iranian oil. In the US, demand may slow down now that the summer driving season has passed its peak. The topside of WTI today is likely capped by yesterday’s high at 52.14.
As a stronger US dollar hit precious metals, gold fell to an eight-month low and nearly the lowest level since November. Statements of pending interest rate rise by Federal Reserve Chair Janet Yellen have trigged the longest rout of gold in eight months as it is not an interest-bearing asset. In Europe, news of upcoming resolution to the Greek debt crisis also reduces safe haven demand and contributes to a downward momentum in gold prices.
Various Asian countries are on a public holiday today to celebrate Hari Raya. This thin market has helped to retain gold prices above this year’s support level at 1142.59.
Copper is edging up in Asia morning together with a rally in China’s stock market that enhances sentiment of industrial metal demand. The Shanghai Composite Index has gained more than 2 percent in the morning. However long term prospects for copper prices remains subdued as economic slowdown is still a sticking point in China. The metal should remain below a resistance level of 20-day moving average.
GOLD TECHNICAL ANALYSIS – Gold prices touches down to this year’s low at 1142.59 and today developments will center on a make-or-break of this support level. Fundamental factors and momentum signals all hint at further downside for prices. Therefore Monday’s opening prices may still be biased lower even if there is no break today.
Daily Chart - Created Using FXCM Marketscope
COPPER TECHNICAL ANALYSIS – Copper prices are well contained below the resistance level of 20-day moving average at 2.570. This is a sign that the current correction is waning and upcoming prices might return to the multi-month downtrend. Range traders could look to sell any intraday rally up to 20-day moving average if this correction persists.
Daily Chart - Created Using FXCM Marketscope
CRUDE OIL TECHNICAL ANALYSIS – WTI oil prices have stuck to lower bound of the current range despite slight gains in Asia trade this morning. Momentum signals point to lower extension, however the bears had better wait for any contest or break of a support level at 49.86 before considering positions. On the contrary, any upward rebound during the course of today’s session would further validate the range.
