Talking Points:
- Crude oil prices may have topped below $49/barrel mark
- Gold prices break range floor, pave way for deeper drop
- Fed-speak may compound commodities selling pressure
Commodity prices tumbled after a hawkish tone in minutes from April’s FOMC meeting fueled imminent rate hike speculation, as expected. Crude oil prices recoiled downward after hitting a seven-month high while gold prices broke through two-week range support, opening the door for deeper losses. The priced-in probability of tightening at next month’s Fed meeting has jumped to 34 percent having registered at just 4 percent at the beginning of the week.
Looking ahead, a quiet economic calendar will allow time for the markets to digest the latest round of volatility. The lull may proved short-lived however as Fed-speak continues to fuel speculation about the trajectory of US monetary policy. Comments from Vice Chair Fischer and New York Fed President Bill Dudley are due to cross the wires.
Both officials fall into the mainstream core of the rate-setting FOMC committee, so hawkish remarks matching the Minutes document are likely to be taken as representative of the overall consensus. Needless to say, this stands to boost June tightening probabilities further and apply further selling pressure to commodity prices, with gold falling on ebbing anti-fiat demand as crude oil suffers alongside stocks amid the ensuing risk aversion.
What does FXCM traders’ gold positioning say about the trend going forward? Find out here!
GOLD TECHNICAL ANALYSIS – Gold prices broke though range support at 1261.70, the 23.6% Fibonacci expansion, opening the door for a test of rising channel support in play since mid February (now at 1236.70). Alternatively, a reversal back above 1261.70 sees the next upside barrier in the 1294.26-1307.49 area (January 22 2015 high, 38.2% level).
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices may be carving out a top below the $49/barrel figure marked by the appearance of a Bearish Engulfing candlestick pattern. A daily close below the 38.2% Fibonacci expansion at 47.41 targets the 23.6% level at 45.73. Alternatively, a push above the 50% Fib at 48.77 exposes the 61.8% expansion at 50.13.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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