Oil, gold and silver are positioned to extend recent gains amid signs that the upward correction in risk appetite will continue but the upcoming release of minutes from January’s US Federal Reserve monetary policy meeting may undermine the bullish scenario.
Commodities - Energy
[B]Oil Prices Overcome Resistance but Fed Minutes Loom Ahead[/B]
[B]Crude Oil (WTI) $77.63 +$0.62 +0.81%[/B]
Prices extend recent gains amid a continued rebound in risk appetite, with the percent-change correlation between crude and the MSCI World Stock Index now at a very formidable 0.93. European shares are firmly in positive territory and US equity index futures are trading 0.4% higher ahead of the opening bell on Wall St, boosting the case for further upside. January’s US Housing Starts and Building Permits figures are expected to register gains, which bodes well for the bullish scenario considering their implications for demand. Indeed, the US construction sector is the single largest global crude consumer. Minutes from January’s Fed policy meeting may prove to undermine the bulls, however. The FOMC statement released following the meeting revealed that for the first time in a year, one of the voting members of policy board dissented from the consensus. The outlier was Kansas City Fed branch president Thomas Hoenig, who said that “economic and financial conditions had changed sufficiently that the expectation of exceptionally low [interest rates] for an extended period was no longer warranted.” Should the minutes offer the market a compelling presentation of Hoenig’s argument, this may fuel expectations that US borrowing costs will indeed rise faster than is currently priced in, which is likely to engineer a sharp rise in the US Dollar at the expense of crude prices. Technically, prices have broken out of a falling channel to test resistance at $77.53, the most recent major swing top. A push higher exposes the $79.22 level. Initial support is seen at the broken channel top, now at $74.57.
Commodities - Metals
[B]Gold, Silver Position to Extend Gains as Risky Assets Rally[/B]
[B]Gold $1123.78 +$4.33 +0.39% [/B]
The percent-chance correlation between gold and the MSCI World Stock Index stands at 0.84, hinting that signs of continued rebound in risky assets evident in higher European equities and US equity index futures are likely to see the yellow metal extend recent gains. As with oil, however, minutes from January’s US Fed monetary policy meeting present a wildcard. Technically, a break above $1125.13 exposes $1145.25.
[B]Silver $16.28 +$0.14 +0.88% [/B]
Prices have pushed above resistance at $16.15, with the door now open for a move to $16.82. The percent-chance correlation between silver and the MSCI World Stock Index now stands at 0.88, aligning the fundamental catalysts driving the cheaper precious metal with those of gold and oil.
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