##Crude oil, but can increase as markets Settle after Spain rescue volatility

12 June 2012 06:52 GMT Talking Points
Crude Oil, Copper May Rise as Sentiment Trends Settle After Spain Bailout Volatility Gold and Silver Could Drift Higher on Moderating Safe-Haven Flows into US Dollar Commodity prices are in negative territory overnight, mirroring a selloff across Asian stock exchanges. The MSCI Asia Pacific regional benchmark equity index fell 1 percent amid skepticism about the ability of Spain’s bank bailout deal struck with Eurozone finance ministers over the weekend to calm debt crisis fears gripping the region. Yields on benchmark 10-year Spanish bonds jumped to 648.7bps yesterday, marking the highest level in over a week and showing investors were not sold on the country’s sovereign stability profile despite the aid package. The proximity of Greece’s second attempt at electing a coherent government due June 17 – where the ailing country’s Eurozone membership seems to hang in the balance – likely reinforced the dour mood.
Looking ahead, S&P 500 stock index futures are pointing higher to suggest risk aversion may moderate as markets return toward a neutral setting after Monday’s seesaw volatility and await the next driving catalyst for price action. This opens the door for sentiment-geared crude oil and copper prices to correct higher while gold and silver find support amid easing safe-haven demand for the US Dollar. The bi-annual ECB Financial Stability Review looks to be the most significant bit of event risk on the economic calendar. While traders are unlikely to be particularly surprised by the risks that the central bank will probably identify, the intense focus on Eurozone-linked instability can nonetheless make for a sharp reaction from price action in the absence of other major drivers.
WTI Crude Oil (NY Close): $84.10 // -0.72 // -0.85%
Prices took out support at 83.30 the 14.6% Fibonacci expansion, to challenge the 23.6% barrier at 81.07. A break beneath this boundary targets the 80.00 figure and the 38.2% Fib at 77.33. The 14.6% expansion has been recast as near-term resistance.

Daily Chart - Created Using FXCM Marketscope 2.0
Spot Gold (NY Close): $1596.77 // +3.32 // +0.21%
Prices remain wedged between 1599.17 and 1582.10, the 50% and 38.2% Fibonacci retracement levels, respectively. A break higher exposes the 61.8% Fib at 1616.23, a barrier reinforced by a falling trend line in place since early March. Alternatively, a push downward through support targets 1554.73, followed by the 1522.50-1532.45 area.

Daily Chart - Created Using FXCM Marketscope 2.0
Spot Silver (NY Close): $28.57 // +0.07 // +0.25%
Prices are treading water below resistance at 28.70. A break higher exposes 29.71. The overall structure appears to be showing a Flag chart formation, a setup indicative of bearish continuation. Confirmation is required on a daily close below the pattern’s bottom – now at 28.12 – which would expose 27.06 as the next downside objective.

Daily Chart - Created Using FXCM Marketscope 2.0
COMEX E-Mini Copper (NY Close): $3.344 // +0.058 // +1.77%
Prices continue to hover below resistance at the top of a falling channel set from the May 1 swing high, now at 3.334. A break higher initially exposes the 76.4% Fibonacci retracement at 3.426. Double bottom support lines up at 3.250, with a break below that targeting the 123.6% Fib extension at 3.080.

 123.6% Fib extension at 3.080.

Daily Chart - Created Using FXCM Marketscope 2.0

€ Euro hit by growing threat of Contagion, the fears of Spanish rescue

Discussion points
Euro: Spain-German 10-year spread Hits Record - high, Cyprus rescue crafts Sterling: debt crisis drags UK PM Cameron meets with top officials US Dollar: struggles in holiday trade, RSI Falls Back From Overbought territory Euro: Spain-German 10 years spread Hits Record - high, looms bailouts for Cyprus
The Euro gives the advance of the 1.2623 night as the spread of 10 years between the Spain and the Germany, expanded to a record rate of 509bp and public finance of costs across the periphery European may continue to drag on the exchange rate as it raises the risk of contagion. In response to the current crisis in the financial system Spanish Prime Minister Mariano Rajoy assured that there is not any "rescue" of banks in the region, but argued that the EU bailout Fund could directly recapitalizing commercial banks as Nucula, fourth largest lender in the region, seeks fresh capital EUR 19(d).
The movement anti-austerity of sparks a rift increased in the European Union, we are likely to see Governments under the single currency became more more dependent on monetary aid and the Board of Governors may have little choice but to transport its easing cycle in the second half of the year the fundamental Outlook for the region is darker. Indeed, Panicos Demetriades, Member of the BCE Board warned of an imminent rescue for Cyprus must repair efforts fail to bear fruit, and we could attend the Central Bank employ a range of tools more later this year to contain the risk of a prolonged recession. As the EURUSD struggles to push above the tracing of Fibonacci 23.6% of the top 2009 2010 low around 1. 2630-50, the couple may continue to strengthen in the next 24 hours of trading, but we will keep a close eye on the relative strength index, it bounces back from a low of 30. As the RSI just oversold territory, we will need to see a movement of return over 30 to see a correction in the short term to take form, and we will seek to sell rallies in the EURUSD as European policy makers struggle to restore the confidence of investors.
Pound sterling: debt crisis drags UK PM Cameron to meet with government officials
The pound climbed to a maximum of 1.5716 Monday as Prime Minister David Cameron is expected to meet with the Governor of the Bank of England Mervyn King and Chancellor of the Exchequer George Osborne to further protect the United Kingdom of the crisis of debt, and we could attend the Central Bank to continue to strike a tone dovish monetary policy changes underway in the euro area limits the prospects for the "" United Kingdom BoE Chief Economist Spencer, said Dale casts for the Central Bank a "pessimistic" perspective for the region of the debt crisis "continues to act as a brake" for Britain and the Central Bank can preserve your Dove for monetary policy in the threat of Greek output growth. As the United Kingdom establishes an emergency plan for a breach of the euro area, public policy in Great Britain can continue to increase the attractiveness of the sterling and currency traders can treat the pound sterling as a safe haven that the Government will meet its budget-cutting measures. As the RSI on the GBPUSD bounces back oversold territory, the pound sterling-dollar may have found a floor towards the end of may, and upwelling of the oscillator certainly foreshadows a correction to short-term exchange rate that the couple continues to take over figure 1.2600.
US dollar: struggles over trade, RSI day falls territory surachat
The greenback is struggling to hold its ground Monday, with the Dow Jones - FXCM U.S. Dollar Index (Ticker: USDOLLAR) some 10 147 and we can see the reserve currency consolidate in holiday trade as the RSI falls surachat territory. Market participants seek Friday to the highly anticipated non-farm us report pay tap, we could see the dollar to maintain stable in June, but the market based on the headline may continue to keep the greenback as it benefits from flows of refuge. Nevertheless, as employment in the global economy should grow another 150 K in may, the progressive recovery of the labour market can sap speculation for additional monetary stimulus, and the Federal Reserve may continue to soften the dovish tone for the monetary policy as the Outlook for growth and inflation is accelerating.
-Written by David Song, currency analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @ DavidJSong
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