Crude Oil, SPX At Trend Support Before Critical US Event Risk
US Dollar Technical Analysis – Prices broke above yet another layer of resistance after reversing upward as expected having put in a Bullish Engulfing candle pattern. Near-term resistance is at 10513, the 38.2% Fibonacci retracement. A daily close above that exposes 50% level at 10560. Alternatively, a turn back below horizontal pivot support at 10481 opens clears the way for a test of 10456, the intersection of the 23.6% Fib and a rising trend line set from the July 1 low.
S&P 500 Technical Analysis – Prices put in a bearish Evening Star candlestick pattern, hinting a move lower may be ahead. Negative RSI divergence bolsters the case for a downside scenario. A daily close below rising channel floor support at 1970.70 exposes the 23.6% Fibonacci retracement at 1948.40. Near-term resistance is at 1991.40, the July 24 high.
Gold Technical Analysis – Prices are drifting cautiously lower having topped below $1350/oz three weeks ago. Near-term support is in the 1283.07-87.13 area, marked by a falling trend line set from late June and the 38.2% Fibonacci expansion. A break below that on a daily closing basis exposes the 50% level at 1269.22. Alternatively, a reversal above the 23.6% Fib at 1309.20 eyes the 14.6% expansion at 1322.94.
Crude Oil Technical Analysis – Prices edged below support at 101.87, the 23.6% Fibonacci expansion, exposing the 38.2% level at 100.61. This barrier is reinforced by a rising channel floor at 100.31. A break below that on a daily closing basis eyes the 50% Fib at 99.58. Alternatively, a turn back above 101.87 eyes the July 18 highat 103.91.
WTI And Brent Slightly Higher Amid Falling US Stockpiles
Oil futures held soft gains early Wednesday as anticipated key US data and the Federal Reserve`s decision on US monetary policy for the next price direction.
Oil markets received a boost after data from American Institute of Petroleum (API) on Tuesday showed larger-than-expected decrease in oil inventories; about 4.4 million barrels in the week ending July 25, bringing the total stocks at 369.4 million barrels.
Over the past days, prices were experiencing a significant decline to near breaking levels of $100 a barrel, amid weak demand for oil in Europe and Asia with ample supplies in the Atlantic region, overshadowing the geopolitical tensions in both the Middle East and Ukraine.
On Wednesday, the FOMC will announce the rate decision for July, with expectations to keep the benchmark interest rate at a record-low 0.25%, as well as the completion of the Federal withdrawals for the quantitative easing policy, bringing down the program to $35 billion $25 billion.
The QE3 program will be reduced by buying government bonds to 15 billion dollars from 20 billion, with a reduction of real estate-backed bond program to $10 billion from $15 billion. The Fed is expected to continue withdrawals until October 2014 amid growing expectations that the US central bank will hike the interest rates earlier than expected.
The US jobs report, due to be released Friday, is expected to indicate more evidence on the health of the US labor market, which has recently witnessed a remarkable development after a very low unemployment rate, expected to stay at 6.1% in July, while the consensus are calling for 225-thousand gain in non-farm payrolls this month, from the previous increase of 288 thousand.
The Dollar Index, which measures the performance of the dollar against a basket of major currencies, rose for the seventh day in a row reaching levels of 81.37, compared with the opening level at 81.29.
On the oil markets, West Texas Intermediate for September delivery traded around the levels of $101.57 a barrel, from an opening price of $101.00 a barrel, setting the highest level at $101.58 a barrel and the lowest at $100.84 a barrel.
As for the European benchmark for crude oil, Brent fell 0.06% to trade in a rangebound around the levels of $107.66 a barrel.
Gold Looking For Support At $1300
For the few days to start this week Gold has been slowly but surely easing back towards the $1300 level where it is now looking for some support. In recent hours it dropped sharply through this level however it has held up above $1298. Gold did well at the end of last week to surge higher through the $1300 level back up towards $1310 before easing slightly to start this new week. The $1300 level has been reinforced as a level of significance in the last couple of weeks with gold falling sharply from its highs above $1345 back down to this level where it has been met with overwhelming demand. During the second half of June, gold steadily moved higher but showed numerous incidents of indecision with its multiple doji candlestick patterns on the daily chart. This happened around $1320 and $1330. Several weeks ago now gold enjoyed a stunning surge higher to break through some key levels along its way to reaching a then two month high just above $1320 and immediately after it eased away ever so slightly and consolidated with its flow of doji patterns. It was then able to slowly move higher to a four month high above $1345. It was also able to break through the $1300 level which has recently played a role again. If sellers do take advantage of these relatively higher prices which will most likely bring the $1300 level back into play. The OANDA long position ratio has surged back up towards 70% showing a change in sentiment to more bullish.
At the beginning of June, gold did very well to repair some damage and return to the key $1275 level, then it has continued the momentum pushing a higher to its recent four month high. After moving so little for an extended period, gold dropped sharply several weeks ago from above the well established support level at $1275 as it completely shattered this level falling to a four month low around $1240. It remained around support at $1240 for several days before its recent rally higher. Prior to the strong fall a few weeks ago gold had remain fixated on the $1293 level and had done very little as volatility has dried up completely resulting in gold moving very little. It pushed down towards $1280 before sling shotting back and also had an excursion above $1300 for a short period before moving quickly back to the $1293 area again. Over the last few weeks gold has eased back from around $1315 to establish its recent narrow trading range below $1295 before its recent slump.
Over the last few months the $1275 level has established itself as a level of support and on several occasions has propped up the price of gold after reasonable falls. Throughout the second half of March gold fell heavily from resistance around $1400 back down to a several week low near support at $1275. Both these levels remain relevant as $1275 continues to offer support and the $1400 level is likely to play a role again should gold move up higher. Through the first couple of months of this year, gold moved very well from a longer term support level around $1200 up towards a six month higher near $1400 before returning to its present trading levels closer to $1300.
Gold ended the trading session lower on Tuesday as uncertainty before a Federal Reserve policy meeting and key U.S. data later this week pulled the metal back from a one-week high hit on the back of violence in the Middle East and Ukraine. The Fed kicks off a two-day meeting on Tuesday, with markets watching for clues as to when the U.S. central bank will begin increasing interest rates. The bank will make a statement on Wednesday at the end of the meeting. Gold is highly sensitive to any changes in U.S. monetary policy. It rallied to record highs in the wake of the financial crisis after the Fed's extraordinary stimulus measures drove down interest rates while stoking fears of inflation. U.S. gold futures for August delivery settled down $5.00 at $1,298.30 an ounce. while spot gold was last down 0.3 percent at $1,299.60 an ounce, having peaked at $1,312.10 earlier.
Gold July 30 at 03:10 GMT 1299.5 H: 1300.4 L: 1298.2
During the early hours of the Asian trading session on Wednesday, Gold is trading in a very small range just below the key $1300 level after having recently dropped sharply back through this level in the last 24 hours. Current range: trading right below $1300 around $1299.
Further levels in both directions:
• Below: 1300, 1275 and 1240.
• Above: 1330.
Ratio traders may find it interesting that the gold/silver ratio has pulled back to its major trendline on the weekly chart. Is this an opportunity to go long the ratio?
The Miners Lead A Rising Tide
The asset relationships we have focused on over the past several weeks, is showing patterned replication in its' leading proxy (precious metals miners) - just as the other lagging sectors look to begin making their respective pivots.
While those panning silver and gold have viewed the early July highs as a bearish echo of the Q1 interim top, we have approached the recent consolidation trend as commensurate with the move out of the cyclical low last December.With respect to the kinetic asset sequence of the broader macro story, precious metals have led the moves in long-term Treasuries - which eventually have led a rising tide in a larger basket of commodities.