Richard Rittorno: Broad risk aversion has being weighing on the commodity markets all week. Plenty of motives are contributing to the new tone, but it really boils down to oil, the euro and the Fed.
The IMF started the ball rolling over the weekend by refusing to increase the amount of resources it has available to soothe economies in trouble.
Throw in the announcement the second long-term refunding operation — “quantitative easing” by another name — in Europe tomorrow, and once again it looks like all scenarios are possible in the euro zone.
Ben Bernanke is talking tomorrow as well, and his comments could confirm traders’ worst fears about oil prices and their impact on sluggish economies.
All of this is contributing to the shift to “risk off” with a renewed pushinto the U.S. dollar (NYSEarca:UUP) as a safe haven, and the stronger dollar is in turn weighing on gold, silver and even WTI oil.
The United States Oil Fund (NYSEArca:USO) broke out of the consolidation trading range back on February 21, climbing to the 0.18% Fibonacci extension level before pulling back.
Price on USO could retreat as far as $40.30 level, where the near-term upward trendline — and upper level of the consolidation channel — would become support and converge with the T3 Tilson.
Bull or bear, look for price to make a decision around the triple support level of $40.39.
If price breaks that support, look for a run back into the consolidation channel. Should we bounce off support, look for price to test the 0.18% and 0.27% extension levels before setting its sights on the 52-week high of $45.60.
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