Tuesday, February 8, 2011

Peoples Bank of China "Resets" Crude Oil and Commodity Prices

Yes, that is about what it amounts to, the Chinese will determine world commodity prices. We are reminded again what really matters when it comes to oil and commodity prices now and in the future as the People's Bank of China announced it will raise the one year yuan lending rate to 6.06% from 5.81%, and the one year yuan deposit rate to 3.00% from 2.75%. Obviously the government in China is showing that they are much more serious about the recent inflationary issues that are threatening their economy than most investors thought. And the traders in the crude oil pits are paying attention.

This is shaping up to be a trade war and currency battle like has never been seen before as the U.S. Federal Reserve policy of QE2 keeps driving commodity inflation and demand while emerging markets around the world and especially the Chinese are looking to reel in their inflation woes and drive down those same commodity prices. So who is really in the drivers seat, who has the upper hand? We say the bank is the one that calls the shots and we all know who that is, this is what we get for depending on China to buy our debt while maintaining such a trade imbalance.

Crude oil was lower overnight as it extends the decline off last week's high. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If March extends the decline off last week's high, January's low crossing at 85.11 is the next downside target. Closes above the 20 day moving average crossing at 89.82 would signal that a short term low has been posted. First resistance is the 10 day moving average crossing at 88.95. Second resistance is the 20 day moving average crossing at 89.82. First support is the overnight low crossing at 85.88. Second support is January's low crossing at 85.11. Crude oil pivot point for Tuesday morning is 88.07.

Natural gas was lower overnight as it extends the decline off January's high. Stochastics and the RSI are oversold but remain bearish signaling that additional weakness is possible near term. If March renews the decline off January's high, the 87% retracement level of the October-January rally crossing at 3.975 is the next downside target. Closes above the 20 day moving average crossing at 4.430 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 4.316. Second resistance is the 20 day moving average crossing at 4.430. First support is the overnight low crossing at 4.069. Second support is the 87% retracement level of the October-January rally crossing at 3.975. Natural gas pivot point for Tuesday morning is 4.160.

Gold was higher overnight and trading above resistance marked by the 20 day moving average crossing at 1350.90. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 1350.90 are needed to confirm that a short term low has been posted. If February renews the decline off January's high, the 25% retracement level of the 2009-2010 rally crossing at 1296.40 is the next downside target. First resistance is last Friday's high crossing at 1360.00. Second resistance is the reaction high crossing at 1394.70. First support is January's low crossing at 1309.10. Second support is the 25% retracement level of the 2009-2010 rally crossing at 1296.40. Gold pivot point for Tuesday morning is 1348.90.


Make Sure to Check Out Our Free Weekly Low Risk Stock Picks

Share

No comments:

ShareThis