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Commodities Brief: Oil closes sharply higher as “risk on” assets find steady buyers

FXstreet.com (Barcelona) - The “risk on” theme across global markets continues to benefit oil prices which closed up 1.83% to finish at 94.42. Oil prices are now almost 10% above the previous lows made at 85.90 back on April 18th. Precious metals also managed finish higher, with gold closing up 0.60% at 1475, while silver added 2.28% to finish at 24.57. On a final note, US Equities continue to add to recent gains, with the S&P 500 closing up 11 points at 1593.60.

According to Sean Callow at Westpac Global Markets, “Risk currencies gained in line with global equities as sentiment strengthened in Europe and the US. Helping fuel the move was the weekend formation of a government in Italy, low German inflation (raising expectations the ECB cut rates on Thu and strong US home sales combined with weak core inflation (supporting the continuation of quantitative easing there). Most commodities joined equities in the rally, including Brent crude oil up 0.6% to $103.81/bbl, LME copper 1.2%, zinc 0.8% and gold 0.6% to $1475/oz.”

From a technical perspective, oil is now trading back above all the short term moving averages (9, 20, 45) on the daily chart. This is a constructive development and the longer prices manages to stay above these indicators will continue to benefit the technical set up In addition, today’s close above both the 100 and 200 dma’s (located just below 94) is also a constructive development and could help bring keep future pullbacks shallow. This is the first time since April 12th that oil has closed above both of these longer term moving averages.

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