!! Commodities Look to US GDP Data to Offset Euro Debt Crisis Jitters

Crude Oil, Copper to Follow Stocks Lower as Eurozone Debt Fears Return Gold and Silver Look to US GDP Report to Keep QE3 Expectations Alive Commodity prices are down in early European trade as risk aversion grips financial markets following a Standard & Poor's downgrade of Spain's credit rating. Sense-linked crude oil and silver prices are following shares lower while gold and silver are facing de-facto selling pressure as the dour mood stokes safe-haven demand for the US Dollar. & S P 500 stock index future are pointing sharply lower, hinting more of the same is on tap as Wall Street comes online.
On the economic data front, all eyes are on the first - quarter US Gross Domestic Product figures, where expectations point to a 2.5 percent annualized quarterly increase after a 3 percent rise in the three months through December.The result is likely to be interpreted in the context of this week's FOMC policy meeting, with a better-than-expected outcome carrying the possibility of reminding traders that Ben Bernanke's commentary was hardly as supportive of QE3 as the markets' initial reaction suggested. Alternatively, a disappointing print will further fuel stimulus bets, which certainly seems supportive for precious metals purpose may also (somewhat counter intuitively) help on the risk appetite front as well.
WTI Crude Oil (NY Close): $104.55 / / + 0.43 / / + 0.41%
Prices are showing a Shooting Star candlestick below resistance at 104.90, a former level support reinforced by the top of a falling channel set from early March. The setup warns of bullish exhaustion and hints a turn lower maybe ahead. Initial rising trend line support is now at 101.98.

Spot Gold (NY Close): $1657.43 / / + 13.80 / / + 0.84%
The top of prices was falling channel set from early March now at 1660.60, with a break higher exposing 1680.35. Support lines up at 1638.02, the 23.6% Fibonacci expansion. Absent a daily close above the channel top, the overall trend remains bearish.

Spot Silver (closed NY): $30.09 / / + 0.38 / / + 1.25%
Prices put in a Hammer candlestick above support at 30.23(1) and rebounded to retest a previously broken barrier at 31.11. A push above this statements falling trend line resistance at 31.70. Alternatively, a reversal through immediate support targets the 30.00 lower figure.

COMEX E-Mini Copper (Close NY): $3.774 / / + 0.066 / / + 1.78%
Prices broke back above 3.713, a former level support recast as resistance, with bulls now aiming to retest the underside of a formerly broken Triangle formation (now at 3.816). The 3.713 level is support once again.

! All eyes on the Fed in the recovery of the US hopes can offset global winds

24 April 2012 11:00 GMT Major Currencies vs. US Dollar (% change) 15 Apr 2012 – 20 Apr 2012

 Talking Points
All Eyes on Fed Policy Decision on Hopes US Can Offset Global Headwinds Soft Patch in US Economic Data May Reflect Catch-Up in Consensus Outlook Japanese Yen, Euro Likely to Underperform if FOMC Reveals Fed Optimism Australian Dollar to Lag Commodity Bloc Counterparts on RBA Rate Cut Bets British Pound Focused on BOE QE Prospects, Q1 GDP Report in the Spotlight The central theme driving financial markets remains the extent to which a recession in the Eurozone and related slowdown in China will hurt overall global output as well as the degree to which a stronger recovery in the US can offset these headwinds. Traders were dutifully reminded of the dangers after HSBC reported that China’s manufacturing activity shrank for a third month in April while the preliminary set of Eurozone PMI readings for the same period revealed factory- and service-sector performance that was vastly worse than expected. The focus now turns to the Federal Reserve monetary policy announcement due on Wednesday for an update on the other side of the equation.
US economic data has increasingly to outperform relative to expectations since the last sit-down of the policy-setting FOMC committee (according to data from Citigroup). This may signal that the pace of recovery is once again faltering after a strong start to the year, replaying similar scenarios in 2010 and 2011. Alternatively, it may reflect a catch-up in economists’ expectations for US growth amid signs of genuine acceleration. A survey of analysts polled by Bloomberg hints the latter may indeed be the case. The median forecast for 2012 US GDP growth rose from 2.2 to 2.3 percent since the last Fed meeting, with upgraded expectations for the first, second and third quarters.
If the recovery is indeed gaining momentum, Ben Bernanke and company ought to keep the policy mix unchanged. Indeed, there seems to be little reason to change an approach that’s finally showing signs of working. The more market-moving component of the outing is likely to be found in the updated set of future interest rate projections from individual FOMC members. Traders will be keen to see if any policymakers now expect rates to rise earlier than the official late-2014 time frame. Changes in forecasts for key metrics including GDP growth, unemployment and inflation will also merit attention, particularly if the overall balance reflects an upgrade in the economy’s prospects. Bernanke’s post-announcement press conference may likewise spark volatility in the event that any of the Chairman’s remarks catch the markets off-guard.
On balance, the revelation of a comparatively optimistic Fed is likely to see the US Dollar rise against currencies where the yield outlook is materially less robust, particularly the Japanese Yen (where USDJPY continues to track 10-year Treasury yields). The possibility of additional stimulus at the Bank of Japan rate decision on Friday as it struggles to gain traction toward its 1 percent inflation target would Yen weakness. The Euro is also likely to renew its drive lower, although correlation studies point a stalemate between rates expectations and risk trends as drivers of price action, meaning directional momentum may be somewhat subdued.
The implications of an upbeat FOMC for growth-linked currencies are a bit mixed in that a stronger US recovery would be supportive for risk appetite. We suspect the Canadian and New Zealand Dollar will broadly hold recent ranges as receding fears of further USD dilution clash with moderation in global slowdown fears. A non-event RBNZ rate decision later in the day is likely to reinforce this dynamic. By contrast, the Australian Dollar is likely to find itself under pressure however as rate cut expectations build in the wake of a dismal first-quarter CPI print.
The British Pound largely stands apart from sentiment trends to focus on domestic policy following last week’s surprisingly hawkish BOE meeting minutes and strong set of good economic data (CPI, jobs, retail sales). This puts the first-quarter UK GDP report at center stage. Expectations call for a 0.1 percent increase after output shrank in the previous period. This would avoid a technical recession and reinforce the diminishing probability of another expansion of QE at May’s BOE policy meeting, driving Sterling higher. Needless to say a disappointing outcome would produce the opposite result.
EURO

 Source: Bloomberg
BRITISH POUND

 Source: Bloomberg
JAPANESE YEN

 Source: Bloomberg
CANADIAN DOLLAR

 Source: Bloomberg
AUSTRALIAN DOLLAR

 Source: Bloomberg
NEW ZEALAND DOLLAR

 Source: Bloomberg