Talking Points:
- China authorities coordinately expressed policies to revive market
- Oil rally likely sustains with supportive macro factors from US and China
- Copper finds support from China stimulus post hike
- Gold gained temporary interests though weighed by risk sentiment
Commodities sustained their overnight gains early in the Asian session, followed by brief swings, until a swirl of additional stimulus policies from China offered fundamental support and put a floor under prices.
The central bank, Finance Ministry, and Ministry of Human Resource and Security, have coordinately expressed intentions to stabilize the yuan, buy local stocks, ease the property bubble; pool pension funds, give preferential tax treatment, then diversify and invest 2 trillion yuan in stocks and other assets.
The last New York session saw rejuvenated interests in risky assets, commodities and US dollar, as positive revision of second quarter U.S. GDP and jobless claims gave credence to the case that the US economy is in recovery.
Oil headed for the biggest weekly advance since April as WTI and Brent rose back above their critical levels of $40 and $45 overnight. Positive growth data from the US and upcoming assistance in China bode well for oil just as summer driving demand started to wane. As we projected that Monday low was oil’s bottom, oil will likely carry on a short-term rally through to next week.
Copper found a floor in the region of 2.3160-80 post China news, after brief volatility following a 4.2 percent surge overnight. This biggest advance since May 2013 helped copper to break straight eight weeks of losses. It is good news for the copper bulls that today’s upside extension broke the 20-day moving average at 2.3323. However next week direction is unclear as a similar spike in August 11 failed to sustain on the next day. Copper fundamentals remain the most supportive among major commodities.
Despite a return of risk sentiment, gold managed to score light gains today as investors find anchor amidst a mixture of good US data, risk resumption, and China’s new stimulus measures. Upside of gold prices remains weak until the market interpret more clues on important macro topics from Jackson Hole symposium with main speeches starting today.
GOLD TECHNICAL ANALYSIS – Gold retained above 20-day moving average at 1118.2 and seemed to retain light gains today after four straight days of losses. In the absence of upward signals, gold rises intraday will likely face strong resistance. An intraday resistance level is found at previous double bottom at 1134.7. The swings may provide opportunities for range traders.
COPPER TECHNICAL ANALYSIS – Copper has found support at the previous day’s resistance level at 2.3180. Daily chart shows that copper prices broke above 20-day moving average, and briefly crossed over a long term support-turn-resistance level at 2.3360. The bulls should watch this last level together with 20-day MA for signs of a change to the bearish picture. Copper prices will likely stay elevated for the rest of this week.
15-minute Chart - Created Using FXCM Marketscope
CRUDE OIL TECHNICAL ANALYSIS – WTI oil and Brent oil jumped above their previous critical support levels at 40 and 45 respectively. Upward momentum has just started and there is more room to grow. However long-term downtrend signal from moving averages has not changed, the bulls should take caution with tight stops along the way.
Daily Chart - Created Using FXCM Marketscope