Oil Braces for EIA, Fed Announcements
Crude Oil – The Oil market is little changed ahead of this morning's EIA inventory data, which is expected to show a rise of 1.6 million barrels for the week. Once again the Crude Oil component of the report will take a back seat to gasoline inventories, which are expected to show a drawdown of 800,000 barrels. Tighter gasoline stocks have driven prices higher in recent weeks ahead of the summer driving season. The FOMC interest rate decision and policy statement released this afternoon will have longer-term implications for food and energy prices. A consensus of market observers is expecting a quarter point rate cut and a hawkish statement. A dovish statement, or one not perceived as very hawkish, may spark a late day rally, as it would signal the Fed will continue to take a soft approach to inflation. The June contract remains bullish on the daily chart, but Monday's spinning top followed by yesterday's sharp sell-off could signal a near-term correction. Momentum continues to outpace price and RSI to the downside, also signaling a possible reversal of the uptrend or stagnation. Support comes in at 114.12, 112.61 and 110.25, while resistance can be found at 117.99, 120.35 and 121.86.
Gold – Gold continues to tumble, falling another $7.00 in early trading. The precious metal has lost its luster as an inflation hedge of late, but could get a boost if the chain deflator component of today's GDP report shows higher inflation and/or if the Fed statement is seen as dovish. Gold may have a long, rocky road ahead if one of these two things does not happen. A large chain deflator number may work against precious metal prices if the central bank signals an end to cheap money. June Gold closed below support at 880, signaling a bearish downside breakout. Gold has stout support on the downside, suggesting sell-offs may be slow and drawn out rather than swift and brutal. Support comes in at 866.10, 855.50 and 840.60, while resistance can be found at 891.60, 906.50 and 917.10.
Rob Kurzatkowski, Commodity Analyst
