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Commodities and Precious Metals Rally on Stimulus Expectations
00:00, 14 January 2013
Stock markets in China and India rallied overnight to start the week although European and US markets have been more subdued. The big action so far today has been on commodity and metal markets which have gone into rally mode on anticipation that QE3 in the US and the combination of monetary and fiscal stimulus in Japan could boost resource demand and devalue paper money. Platinum is breaking out while grains, particularly wheat and corn, and soft commodities like coffee and cocoa have attracted renewed interest. Resource currencies, particularly NZD and AUD but not CAD have also been on the move higher today. Earlier today, Chicago Fed President Charles Evans (a voting FOMC member this year) suggested that the FOMC would need to see nonfarm payrolls increase by 200K+ jobs for several months. The last time US nonfarm payrolls grew by more than 200K was way back in February of 2012. Based on this, it would appear those looking for a quick end to QE3 are likely to be disappointed. The street may now look to Fed Chair Bernanke’s speech later this afternoon for confirmation. Stocks in the US have been relatively quiet to start the morning but could see action pick up as the week progresses as earnings season ramps up with numbers from big banks due through the week and General Electric on Friday. Economic news It’s pretty quiet for economic news today, but there were a couple of things overnight: India consumer prices 10.56% vs previous 9.90% India producer prices 7.18% vs previous 7.24% Italy industrial production (7.6%) vs previous (6.1%) US Fed Chair Bernanke is scheduled to deliver a speech at 4:00 pm ET. North American indices The Dow Industrials (US30 CFD) were unable to hold 14,500 and a negative RSI divergence has emerged suggesting it may need to consolidate in the short term. Index remains in an uptrend above 13,440. The S&P 500 (SPX500 CFD) continues to bump up against 1,475 resistance with a run at 1,500 possible on a breakout while support remains in place near 1,465 then 1,450. The S&P/TSX 60 (Toronto60 CFD) remains above its 718 breakout point which has become new support with next resistance near 723 and 732. Commodities today Copper remains in an uptrend, holding above $3.70 support with resistance near $3.72 then $3.82. US crude continues to trade above $93.50 and remains in an uptrend with next major resistance near $94.60 then $95.00. UK crude has bounced off of $110.00 through $111.00 but now faces a key hurdle. It needs to retake the extension of the trend support line it broke last week near $111.50 in order to call off the current downtrend. Gasoline remains below $2.80 and could drift back to retest support near $2.72 with upside resistance on a bounce near $2.85. Natural Gas is back above $3.30, testing the extension of an old trend support line as resistance while RSI has moved back above 50. While these signs appear interesting, this could just be a short term pop as seasonality may start to work against natgas with the end of home heating season now only 2 ½ months away. Next upside resistance if this rally extends appears near $3.45 then $3.65. Corn is rallying today, breaking out over $7.10 to signal the start of an upswing. If it can clear $7.30 it would break a downtrend that has been in place since August with next resistance after that near $7.60. Soybeans continue to struggle in the $13.60-$14.00 zone but RSI suggests downward momentum may be easing. An initial run to retest $14.50 could be possible on a breakout. Wheat is turning higher today in a rally from deeply oversold conditions. While the bounce up through $7.60 is encouraging, wheat needs to clear $7.80 to call off the current downtrend with next resistance after that in the $7.90 to $8.10 zone. Arabica Coffee is driving through 150 today as its breakout rally continues. RSI getting overbought so could run into some resistance near 155 for now but could still trend toward a retest of 162 over time. Robusta Coffee looks poised for a breakout, currently testing 2,000 with a measured run from an ascending triangle base toward a retest of 2,200 possible on a breakout. Current support near 1,975. Cocoa is breaking out today with the price clearing 1,455 and the RSI clearing 1,450 to suggest a new upswing appears underway. Initial upside resistance appears in the 1,500 to 1,520 area with support near 1,435. FX this morning Gold is climbing again today and RSI has moved back above 50, a bullish technical sign. Initial resistance appears near $1,680 but it really still needs to clear $1,700 to call off the current downtrend and a descending triangle with next resistance on a breakout near $1,725. Silver has peeked back above $31.00 as RSI suggests upward momentum accelerating. Next resistance appears near $31.50 then $32.75. Platinum is staging a major breakout today, rallying through $1,650 to signal the start of a new upswing. A measured move from the recent channel suggests that $1,775 could be tested over the long term but initial resistance appears near $1,670 then $1,710. USDCAD is climbing within a $0.9820 to $0.9880 trading range while a rising RSI suggests upward momentum is building. EURUSD is consolidating above $1.3300 as is common following Friday’s big breakout. Upside resistance on trend appears near $1.3390 then $1.3500. GBPUSD is under pressure and falling again today, taking out $1.6060 and opening a potential retest of $1.6000 or even $1.5900 support with resistance emerging near $1.6100. USDJPY keeps trending higher today trading above 89.00 with next resistance near 90.00 then 92.00 and support rising toward 88.50. AUDUSD is trading near $1.0560 with support near $1.0510 as a big ascending triangle continues to form below $1.0610. NZDUSD is consolidating near $84.20 but it needs to break through $0.8475 to call off a double top that appeared last week. Support in a correction appears near $0.8360 then $0.8250.