Oil Trickles Lower as Gold Recovers

Oil continued its downward grind overnight as gold recovered some of its losses as President Trump’s first 100-days draws to a close.

OIL

Oil continued its bullish unwind overnight, with both Brent and WTI spot contracts down just over 0.50%. Rising shale production and uncertainty over the OPEC deal extension being quoted as reasons for the fall. We continue to feel the primary cause is excessive short –term long positioning unwinding. In other words, the issues mentioned are known unknowns.

Nevertheless, in the bigger picture, both reasons are relevant. These should ensure any meaningful rallies in oil will be capped until the late May decision date.

Both Brent spot and WTI spot have closed opened in Asia near the previous session’s lows. Brent spot trades at 51.70 with support nearby at 51.30 and then its 200-day average at 50.80 followed by the 50.00 level. Resistance sits at 52.50 and 53.50.

 

 

WTI spot trades at 49.00, just above its 200-day average at 48.65, a break opening up a move to 47.00. Resistance sits at 50.00 and 51.00 a barrel.

GOLD

Gold recovered some of its post-election sell-off overnight to open roughly mid-range at 1278 this morning in Asia. With the election fading from memory rapidly the market now turns its attentions to President Trump’s legislative agenda.

Although news of a 15% corporate tax rate will no doubt be warmly received, the worries over a potential U.S. government shutdown seem to be taking precedence in traders’ minds. This has probably been gently supportive of gold overnight. We expect this issue to be more of a storm in a teacup given the soothing noises from Republican leaders this week.

 

Gold itself, however, is still not a rosy picture technically with the potential of a decent downside correction if and when uncertainty fades. Gold has resistance at 1290 and then 1296, having failed in this area numerous times last week. Below, support lies at 1265.50 and then the 200-day average at 1254.80. A daily close below 1240 would signal a much larger correction could be on the way.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Currency Analyst
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia.Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.
Jeffrey Halley

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