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Commodities Brief: Metals counter trend rally fizzles out as risk assets stumble

FXstreet.com (Barcelona) - The recent FOMC meeting failed to impress market participants as the theme of the day was “risk off” across the majority of asset classes. It was a rough day for commodities in particular, with both the precious metals and base metals suffering sharp declines. Silver led the decline, falling 2.87% to finish at 23.62. At one point the metal did trade as low as 23.21, but was able to claw some of its losses back later in the NY session. Gold also suffered steep losses, closing down 1.22% to finish at 1457 (although it did trade as low as 1439). On a final note, it should be noted copper closed down 3.7%, finishing the day at 3.06 (it’s lowest daily close since June 2010.)

From a technical perspective, silver and copper suffered the worst technical damage today, while gold was able to hold up a bit better. The silver chart is again looking like a “bear flag”, which would be confirmed with a close below the lower support channel at 23.20. This pattern has a measured move target of down near 18.20. Copper is still under the influence of a major head & shoulders pattern (weekly/month chart) which has longer term measured move targets as low as 1.65 (initial resistance will now be the previous swing low of 3.09). The picture in gold is not as clear on the daily chart, but it could also be argued the pattern resembles a bear flag and would need a close below 1439 to be confirmed (measured move price target all the way down near 1200)

In conclusion, the past few weeks have been a good example of why focusing on longer term time frames can help determine the the path of lease resistance. The technical damage which was done in the metals a few weeks back was substantial and now it appears the recent counter trend rally is coming to an end. It will be important to see if the above mentioned patterns are confirmed in coming sessions.

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