Is Black Gold Losing Its Luster?
Crude Oil – Oil prices are tumbling for the second consecutive session on speculation that Iran's talks with the West may have taken a turn for the better. While a compromise over the country’s nuclear program is not imminent, prices are falling on the mere fact that the standoff has not escalated. Israel's successful interceptor missile test also suggests that the nation may forgo a proactive military approach in dealing with the perceived Iranian threat. The U.S. Dollar may begin to strengthen against the Euro and British Pound, as both the Euro Zone and UK economies are beginning to show signs of potentially falling into recession. Weak German manufacturing news yesterday was followed by indications that the UK's services sector has slowed dramatically. The Fed may have a difficult time raising interest rates until early next year, as lending has not shown any significant improvement. It appears that the geopolitical firestorm and worries over the falling greenback have subsided for the moment, but bearish economic indicators or renewed tensions with Iran could spark a rally at any time. August Crude Oil is currently trading below the 9-day moving average, signaling possible short-term technical weakness. The market is also nearing the 18-day average on the downside; closes below the average may signal that a near-term high is in place. The chart pattern is hinting at the possibility of a short-term reversal to the uptrend and a close below the $140 mark could be a psychological blow to the bull camp. Momentum is showing bullish divergence from the RSI, suggesting that this correction may be short lived. Support comes in at 139.08, 136.80 and 134.07, while resistance can be found at 144.09, 146.82 and 149.10.
Silver – Precious metals posted solid gains in early overnight trading, only to reverse course and head lower going into the U.S. session. Global stock indexes and U.S. index futures are sharply lower, further aiding prices, but the weight of lower energy prices has taken a toll on the Silver market. The outlook for precious metals has improved recently due to weakening economic conditions around the globe, but the market has been unable to maintain upside due to outside market pressures. If stocks continue to plummet, traders may flock to the safe havens of Gold and Silver, but a rising Dollar could keep more traders on the sidelines. After testing resistance in the 18.40-18.45 area, the September contract has pulled back. For the market to pick up some steam, prices will likely need to clear this resistance area and 18.85 for the bulls to firmly gain control of the market. Inability to cross the 18.45 threshold could result in further range-bound trading. Momentum is showing bullish divergence from RSI, hinting at possible short-term strength. Support comes in at 17.62, 17.32 and 17.015, while resistance can be found at 18.225, 18.53 and 18.83.
Rob Kurzatkowski, Commodity Analyst
