Volatility in metal markets drives trading

June 17, 2016

It has been a hectic day for metal traders with big swings and volatility across the board for the precious metals. Both gold and silver tested the market and traders appetite for technical levels as US data sent markets into a tailspin. While CPI data came in flat at 0.2% m/m, which is normally a mover for the market, it was unemployment claims and the manufacturing index which set the market alight. Unemployment claims was weaker than anticipated at 277K, but the Fed manufacturing index was the real star as it jumped to 4.7 showing a pick up in the US manufacturing sector, something the markets were very positive over and caused a rally in the US dollar and a selloff in precious metals which were being used as a hedge against the FED being dovish.

Gold looked to break through the major technical level at 1296.48 before pushing all the way up to resistance at 1315.92. The sudden bite back and the engulfing candle which has formed today, which has eaten away all of the gains from yesterday could be a key turning point for the market. Certainly the FED will view the jump in the manufacturing index with glee at supporting the possibility of further rate hikes in the medium term. Gold is now looking to trickle lower to 1262 and the market is likely to look to push unless we a see in voice from the FED or more negative US data.

Silver also looked to make the jump today in line with gold as the correlation between the two took off. Silver managed to push towards 17.836 before forming a double top on the daily chart and has since retreated sharply on the back of US strength. The selloff was so severe that it pushed through support at 17.308, and looking for low levels I would expect the floor at 15.917 to be an ideal target for traders in the long run, but there are several minor support levels on the way down that traders will bounce between.

Oil has dropped sharply on the charts yet again continuing its weakness as USD strength continues and as technical bears look to take a swipe on the charts and push oil lower. At present oil has paused at support at 45.91 and this is also being supported by the 50 day moving average. However in the current climate buyers are looking a bit thin for oil, and the recent surprise reduction in the deficit is spurring on bearish sentiment. Looking lower oil has support further down at 44.58 and I would not be surprised to see the extension continue to this level, as the trend is always your friend when it comes to technical trading. 

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